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When additional resource stocks reduce welfare

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Author Info

  • Benchekroun, Hassan
  • Halsema, Alex
  • Withagen, Cees

Abstract

In the dominant firm model, we show that an increase of the fringe's reserves of a nonrenewable resource may lead to a decrease in aggregate discounted social welfare. This happens when the difference between the fringe's extraction cost and the dominant firm's is positive and large enough. We also show that welfare might decrease if the fringe's marginal extraction cost decreases.

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File URL: http://www.sciencedirect.com/science/article/B6WJ6-4X5JR3G-2/2/2b6a19421c3b62c7700585d67fff9f1c
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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 59 (2010)
Issue (Month): 1 (January)
Pages: 109-114

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Handle: RePEc:eee:jeeman:v:59:y:2010:i:1:p:109-114

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Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Nonrenewable resources Dominant firm versus fringe Nash equilibrium;

References

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  1. Chakravorty, Ujjayant & Moreaux, Michel & Tidball, Mabel, 2006. "Ordering the Extraction of Polluting Nonrenewable Resources," IDEI Working Papers 415, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Gilbert, Richard J. & Goldman, Steven M., 1978. "Potential competition and the monopoly price of an exhaustible resource," Journal of Economic Theory, Elsevier, vol. 17(2), pages 319-331, April.
  3. Gérard Gaudet & Pierre Lasserre, 2011. "The Efficient Use Of Multiple Sources Of A Nonrenewable Resource Under Supply Cost Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 245-258, 02.
  4. Benchekroun, Hassan & Halsema, Alex & Withagen, Cees, 2009. "On nonrenewable resource oligopolies: The asymmetric case," Journal of Economic Dynamics and Control, Elsevier, vol. 33(11), pages 1867-1879, November.
  5. Mason, Charles F & Polasky, Stephen, 1994. "Entry Deterrence in the Commons," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(2), pages 507-25, May.
  6. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October.
  7. Stiglitz, Joseph E, 1981. "Potential Competition May Reduce Welfare," American Economic Review, American Economic Association, vol. 71(2), pages 184-89, May.
  8. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-52, November.
  9. Kemp, Murray C & Long, Ngo Van, 1980. "On Two Folk Theorems Concerning the Extraction of Exhaustible Resources," Econometrica, Econometric Society, vol. 48(3), pages 663-73, April.
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Citations

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Cited by:
  1. Ngo Van Long & Stephanie F. McWhinnie, 2010. "The Tragedy of the Commons in a Fishery when Relative Performance Matters," School of Economics Working Papers 2010-07, University of Adelaide, School of Economics.
  2. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
  3. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," International Review of Economics, Springer, vol. 1(1), pages 115-148, March.

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