Existence of equilibria in exhaustible resource markets with economies of scale and inventories
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Date
2017-03
Publication Type
Journal Article
ETH Bibliography
yes
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Abstract
The paper proves the existence of equilibrium in non-renewable resource markets when extraction costs are non-convex and resource storage is possible. Inventories flatten the consumption path and eliminate price jumps at the end of the extraction period, so that market equilibrium becomes possible. We distinguish between two types of solutions, one with immediate and one with delayed buildup of inventories. For both cases, we do not only characterize potential optimal paths but also show that equilibria actually exist under fairly general conditions. It is found that optimum resource extraction involves increasing quantities over a period of time. What is generally interpreted as an indicator of increasing resource abundance is thus perfectly compatible with constant resource stocks.
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published
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Journal / series
Volume
63 (3)
Pages / Article No.
687 - 721
Publisher
Springer
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Date created
Subject
Exhaustible resources; Non-convex extraction cost; Equilibrium existence; Resource storage
Organisational unit
03877 - Bommier, Antoine / Bommier, Antoine
03635 - Bretschger, Lucas (emeritus) / Bretschger, Lucas (emeritus)
02120 - Dep. Management, Technologie und Ökon. / Dep. of Management, Technology, and Ec.
Notes
It was possible to publish this article open access thanks to a Swiss National Licence with the publisher.
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Related publications and datasets
Is new version of: https://doi.org/10.3929/ethz-a-010210631