OPECONOMICS: How do cooperative and non-cooperative game theory models explain cartel formation and price fixing strategies in the global oil market?
Year: 2025
Type: article
Abstract: Over the years, oil has become a significant source of geopolitical conflict.The present work analyzed the behaviour of member nations of the OPEC cartel and their economic interactions with nations both within and outside the cartel. We will see how game theory models such as repeated Nash equilibria, explain activities such as collusion, cheating within a cartel, and price wars in the global oil market. I take a quantitative approach in designing most of these payoff matrices to show how revenue maximizing actions from the players brings widespread consequences to citizens across the globe who are dependent on oil for a multiplicity of uses. This real world analysis brings to the forefront the very reasons why a mostly ineffective cartel such as OPEC still exists, and what shortcomings of theirs keeps them from meeting all of their set goals while being at odds with the values of the free market.
Author: Shreyas Shah
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4410208189