An Oligopoly-Fringe Model with HARA Preferences

Abstract Inspired by empirical evidence from the oil market, we build a model of an oligopoly facing fringe as well competition renewable resources. We explore different subclasses HARA utility functions (Cobb–Douglas, power and quadratic utility) to check robustness results found in previous literature. For isoelastic demand, characterize equilibrium extraction rates oligopolists. There always exists phase simultaneous supply oligopolists fringe, implying inefficient order use resources since have smaller unit costs carbon emissions than fringe. calibrate our market quantify this sequence effect . In benchmark calibration, find for three that is responsible almost all welfare loss compared first-best. It becomes decreases. Furthermore, show climate damage Green Paradox effects depend non-monotonically on degree power.