Strategic resource dependence
AbstractWe consider a situation where an exhaustible-resource seller faces demand from a buyer who has a substitute but there is a time-to-build delay for the substitute. We find that in this simple framework the basic implications of the Hotelling model (1931) are reversed: over time the stock declines but supplies increase up to the point where the buyer decides to switch. Under such a threat of demand change, the supply does not reflect the current resource scarcity but it compensates the buyer for delaying the transition to the substitute. The analysis suggests a perspective on costs of oil dependence.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Economic Theory.
Volume (Year): 146 (2011)
Issue (Month): 2 (March)
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Web page: http://www.elsevier.com/locate/inca/622869
Dynamic bilateral monopoly Markov-perfect equilibrium Depletable resources Energy Alternative fuels Oil dependence;
Other versions of this item:
- D4 - Microeconomics - - Market Structure and Pricing
- D9 - Microeconomics - - Intertemporal Choice and Growth
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
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