Abstract

The failure of analysts to understand OPEC behavior is traced in part to the use of naive textbook models of cartels. This paper compares and contrasts several paradigms of OPEC, which have been adopted explicitly or implicitly by the community of professional and academic analysts. A behavioral view of OPEC that highlights internal budgetary considerations and satisficing-type behavior by several OPEC producers is advanced. The implications for future prices and government policy are assessed. The return of competitive prices is predicted if consuming nations would stimulate further conservation and domestic production through an oil tariff.