On the influence of market structure in modelling the US copper industry

Many of the contemporary models used to describe the behavior of the mineral industries assume a competitive market i.e. one in which market price is equal to marginal production cost. One such recent model of the worldwide copper industry is the MIDAS-II model developed for the Bureau of Mines 3, 4]. This model is used to project production and prices up through the year 2000. The purpose of this paper is to demonstrate the importance of the assumed market structure in the construction of these forecasts. If the market structure of the US copper industry is assumed to be comprised of a few large firms (an oligopoly), then forecasts based upon exactly the same data base differ significantly from the competitive market assumption.