Learning and price volatility in duopoly models of resource depletion
AbstractThe combination of learning and depletion in non-renewable resource markets adds significant volatility to commodity prices. The market consists of a small number of suppliers who make depletion plans based on their perceptions of how sensitive price is to supply. Learning leads to changes in these perceptions and hence the revision of depletion plans, which can have a dramatic effect on market supply and price. Firstly, price trends upwards faster than the rate of time preference as the non-renewable resource approaches exhaustion. Secondly, there are frequent escape episodes in which price rises rapidly before gradually falling back. The striking volatility and nonstationarity in commodity prices that results has parallels in oil price data.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 60 (2013)
Issue (Month): 7 ()
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Web page: http://www.elsevier.com/locate/inca/505566
Commodity prices; Depletion; Escape dynamics; Learning; Non-renewable resources;
Other versions of this item:
- Ellison, Martin & Scott, Andrew, 2009. "Learning and Price Volatility in Duopoly Models of Resource Depletion," CEPR Discussion Papers 7378, C.E.P.R. Discussion Papers.
- Martin Ellison & Andrew Scott, 2009. "Learning and Price Volatility in Duopoly Models of Resource Depletion," OxCarre Working Papers 025, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
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