Earlier models of innovation under oligopolistic rivalry are modified to include a “share parameter” σ, describing the manner in which profits are divided among rivals when one firm is successful in its search for a valuable resource stock. There is a unique value of σ that maximizes expected industry profits, by “guiding” noncooperative oligopolists to choose the profit-maximizing exploration rate. Moreover, setting σ at this maximizing value—which always allocates some share of industry profits to the “losers” in the exploration race—leads to an exploration rate identical to what would be chosen by a jointly managed cartel.

In extractive industries producing a resource that does not quickly wear out, monopoly power has an important effect on the rate of production, and hence on the pattern of prices, over time. In many cases, a monopoly producer of a durable resource will rationally choose a high initial price, and lower that price over time; this contrasts dramatically with the strategy of a competitive extractive industry, which optimally increases price over time at the industry's discount rate, regardless of the durability of the resource. In the cases we study, it is found that a monopoly producer of a durable resource will be more conservation-minded than will a competitive industry, initially producing at a slower rate in order to keep early-period prices high.