2008), Forward trading in exhaustible-resource oligopoly, MIT-CEEPR working paper

We analyze oligopolistic exhaustible-resource depletion when firms can trade forward contracts on deliveries, a market structure prevalent in many resource commodity markets. We find that this organization of trade has substantial im-plications for resource depletion. As firms ’ interactions become infinitely frequent, resource stocks become fully contracted and the symmetric oligopolistic equilib-rium converges to the perfectly competitive Hotelling (1931) outcome. Asymme-tries in stock holdings allow firms to partially escape the procompetitive effect of contracting: a large stock provides commitment to leave a fraction of the stock uncontracted. In contrast, a small stock provides commitment to sell early, during the most profitable part of the equilibrium. (JEL classification: G13, L13, Q30).