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Extracting Resource Deposits of Unknown Size: Optimal Order

Author

Listed:
  • Kemp Murray C.

    (University of New South Wales, SydneyNSW 2052, Australia)

  • Van Long Ngo

    (McGill University, Sherbrooke St W, Montreal, QuebecH3A 0G4, Canada)

Abstract

The optimal order of extracting resource deposits of unknown size depends on the informational characteristics of the extraction process. This paper fills the gap between two strands of literature. The first strand is about the optimal extraction of single reserve under stock-size uncertainty. The second strand is about the optimal order of extraction of deposits of known sizes. Our emphasis on the premium for resolution of uncertainty complements Solow and Wan’s shadow surcharge when extraction moves from a low-cost deposit to a high-cost one.

Suggested Citation

  • Kemp Murray C. & Van Long Ngo, 2009. "Extracting Resource Deposits of Unknown Size: Optimal Order," German Economic Review, De Gruyter, vol. 10(4), pages 401-421, December.
    • Handle: RePEc:bpj:germec:v:10:y:2009:i:4:p:401-421
    DOI: 10.1111/j.1468-0475.2009.00488.x
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    References listed on IDEAS

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