OPEC Production: The Missing Link
- 1 June 1994
- journal article
- Published by SAGE Publications in The Energy Journal
- Vol. 15 (1_suppl) , 115-132
- https://doi.org/10.5547/issn0195-6574-ej-vol15-nosi-7
Abstract
The future of oil depends critically on the production decisions of OPEC, which in turn depend on a variety of factors internal and external to the cartel. This paper uses a simulation of the world oil market to compute the payoff to OPEC members of alternative price and production profiles, focusing on the incentives to cooperate as well as to cheat. A “tit-for-tat” strategy by the Saudis significantly reduces the incentives to cheat, but the payoff for cheating is still positive for the smaller OPEC producers. Accordingly, prices well below the cartel's joint profit maximizing level seem most likely.Keywords
This publication has 6 references indexed in Scilit:
- Oil Demand in the Industrialized Countries*The Energy Journal, 1994
- OPEC and World Oil Prices: Is the Genie Back in the Bottle?Energy Studies Review, 1992
- OPEC Behaviour Under Falling Prices: Implications For Cartel StabilityThe Energy Journal, 1990
- Mineral Depletion, with Special Reference to PetroleumThe Review of Economics and Statistics, 1990
- Does an Exhaustible Resource Usually Have Many Near‐Optimal Depletion Paths?American Journal of Agricultural Economics, 1988
- Oil producing countries' discount ratesResources and Energy, 1986