Product quality differentiation in a renewable resource oligopoly

The typical assumption in the literature on oligopoly exploitation of natural resources is that all units of extracted resource have the same commercial value. We depart from this assumption by allowing a constant share theta of the available resource stock to be associated with higher commercial value, thus introducing product quality differentiation. We interpret theta as a measure of resource quality and study the impact of an increase in theta on resource exploitation and social welfare. The main finding of our analysis is that an increase in resource quality can be welfare-reducing.