The Price of Oil, Industrial Prices and Production: A Macroeconomic Analysis of General Equilibrium (Prix Du Petrole, Prix Industriels Et Production: Une Analyse Macroeconomique D'Equilibre General) (French)
31 Pages Posted: 5 Feb 2010 Last revised: 4 Mar 2010
Date Written: 1986
Abstract
In this article, we construct a model that is aimed at explaining the general equilibrium reactions of an oil importing country that result from the pricing policies of an exporting country. The importing country has a competitive market while the exporting country is a monopoly. Our model formally explains, that the demand function that the monopoly country faces depends on its own actions, through the effect of oil prices on the general equilibrium of the importing country. OPEC is a good example of a monopoly that has an important effect on the general equilibrium. We find similar effects in previous models constructed by Peace (1953, 1956), Hahn (1977) and later Hart (1982). The two last examples are in a context of general equilibrium. We explain that when the monopoly country takes into account the general equilibrium of its own market, the political results are clearly different from a partial equilibrium analysis.
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