Gains to Producers from the Cartelization of Exhaustible Resources

Three cartels are examined to determine the potential gains to producers of forming cartels to market exhaustible resources by calculating both monopolistic and competitive price trajectories. Included in the study are the Organization of Petroleum Exporting Countries (OPEC), International Council of Copper Exporting Countries (CIPEC), and the International Bauxite Association (IBA). An optimal pricing model is described and applied to each of the cartels. Cartels are concluded to have an advantage for petroleum and bauxite, but not for copper. The smaller market shares of CIPEC and short-term lag adjustments seem to be the determining factors rather than resource exhaustion. Future research is needed to determine the effects of competitive firms changing their price expectations and cartel formation of consuming countries. 27 references.