A general equilibrium model of trilateral trade with oil duopoly

I study the economic implications of the world oil market dominated by OPEC and non-OPEC major oil producing countries using a general equilibrium model of trilateral trade with oil duopoly. There are three countries and three goods, x, y, and oil (z). Home (H) is endowed with good x . Foreign (F) i...

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Main Author: Koo Woong Park
Format: Article
Language:English
Published: Emerald Publishing 2008-12-01
Series:Journal of International Logistics and Trade
Online Access:https://www.emerald.com/insight/content/doi/10.24006/jilt.2008.6.2.23/full/pdf
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author Koo Woong Park
author_facet Koo Woong Park
author_sort Koo Woong Park
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description I study the economic implications of the world oil market dominated by OPEC and non-OPEC major oil producing countries using a general equilibrium model of trilateral trade with oil duopoly. There are three countries and three goods, x, y, and oil (z). Home (H) is endowed with good x . Foreign (F) is endowed with good y and also produces oil (z). Middle (M) is an oil producing country and supplies oil only. I consider two types of oil market structure; (1) Cournot duopoly and (2) perfect competition. I find that Foreign is actually worse off under Cournot duopoly despite being a duopolist for wide range of parameter values that reflect real world situations. This is mainly due to reduced consumption of oil and reduced value of good y endowment under duopoly when Foreign is a net oil exporter or oil autarky, and is also due to worsening terms-of-trade effect under duopoly when Foreign is a net oil importer. Welfare reversal with higher welfare of Foreign under oil duopoly occurs only under highly unrealistic parameter values, and hence the main results of the study remain robust.
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spelling doaj.art-718853b68fc7435c93faf9b4cadc030b2023-11-17T10:43:18ZengEmerald PublishingJournal of International Logistics and Trade1738-21222508-75922008-12-0162234810.24006/jilt.2008.6.2.23A general equilibrium model of trilateral trade with oil duopolyKoo Woong Park0BK21, Department of Economics Seoul National University 599 Gwanak-ro, Gwanak-gu, Seoul, 151-742, KoreaI study the economic implications of the world oil market dominated by OPEC and non-OPEC major oil producing countries using a general equilibrium model of trilateral trade with oil duopoly. There are three countries and three goods, x, y, and oil (z). Home (H) is endowed with good x . Foreign (F) is endowed with good y and also produces oil (z). Middle (M) is an oil producing country and supplies oil only. I consider two types of oil market structure; (1) Cournot duopoly and (2) perfect competition. I find that Foreign is actually worse off under Cournot duopoly despite being a duopolist for wide range of parameter values that reflect real world situations. This is mainly due to reduced consumption of oil and reduced value of good y endowment under duopoly when Foreign is a net oil exporter or oil autarky, and is also due to worsening terms-of-trade effect under duopoly when Foreign is a net oil importer. Welfare reversal with higher welfare of Foreign under oil duopoly occurs only under highly unrealistic parameter values, and hence the main results of the study remain robust.https://www.emerald.com/insight/content/doi/10.24006/jilt.2008.6.2.23/full/pdf
spellingShingle Koo Woong Park
A general equilibrium model of trilateral trade with oil duopoly
Journal of International Logistics and Trade
title A general equilibrium model of trilateral trade with oil duopoly
title_full A general equilibrium model of trilateral trade with oil duopoly
title_fullStr A general equilibrium model of trilateral trade with oil duopoly
title_full_unstemmed A general equilibrium model of trilateral trade with oil duopoly
title_short A general equilibrium model of trilateral trade with oil duopoly
title_sort general equilibrium model of trilateral trade with oil duopoly
url https://www.emerald.com/insight/content/doi/10.24006/jilt.2008.6.2.23/full/pdf
work_keys_str_mv AT koowoongpark ageneralequilibriummodeloftrilateraltradewithoilduopoly
AT koowoongpark generalequilibriummodeloftrilateraltradewithoilduopoly