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Resource Characteristics, Extraction Costs, and Optimal Exploitation of Mineral Resources

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Author Info
A. Marvasti ()
Abstract

This paper modifies the traditional theories ofnon-renewable resource exploitation where reserve sizeis assumed to be the major determinant of extractioncosts. In a competitive model of resourceexploitation, characteristics of aggregate reservesare considered as a determinant of extraction cost. Then dynamic solutions for the price and exploratoryefforts are developed. Various price paths arefeasible under different assumptions with regard tothe changes in the reserve characteristics over time. Past empirical research shows that there is noconsistent price path for all materials. In fact, itis the quality of newly discovered reserves as well astheir size that has affected material prices. Todemonstrate the complexity of a firm's decision torecover mineral from new deposits, potentials forsubstantial high quality marine mineral resources areevaluated as a substitute for land-based resources.However, several factors including the decreasingtrend in marine mining R & D expenditures and thepotential impact of large-scale marine mining on priceof minerals indicate that mining of mostnon-hydrocarbon marine minerals will not take place inthe near future. Copyright Kluwer Academic Publishers 2000

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File URL: http://hdl.handle.net/10.1023/A:1026566931709
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Publisher Info
Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

Volume (Year): 17 (2000)
Issue (Month): 4 (December)
Pages: 395-408
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Handle: RePEc:kap:enreec:v:17:y:2000:i:4:p:395-408

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Related research
Keywords: cost function marine resources resource quality

References listed on IDEAS
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  1. Pindyck, Robert S, 1978. "The Optimal Exploration and Production of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 841-61, October. [Downloadable!] (restricted)
  2. Ciarns, Robert D & Lasserre, Pierre, 1986. " Sectoral Supply of Minerals of Varying Quality," Scandinavian Journal of Economics, Blackwell Publishing, vol. 88(4), pages 605-26.
    Other versions:
  3. Slade, Margaret E., 1988. "Grade selection under uncertainty: Least cost last and other anomalies," Journal of Environmental Economics and Management, Elsevier, vol. 15(2), pages 189-205, June. [Downloadable!] (restricted)
  4. Adams, F. Gerard, 1980. "The Law of the Sea treaty and the regulation of nodule exploitation," Journal of Policy Modeling, Elsevier, vol. 2(1), pages 19-33, January. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. Marvasti, A., 1988. "Alternative regimes for the exploitation of manganese nodules and their impacts," Journal of Policy Modeling, Elsevier, vol. 10(2), pages 317-319. [Downloadable!] (restricted)
  7. Pindyck, Robert S, 1980. "Uncertainty and Exhaustible Resource Markets," Journal of Political Economy, University of Chicago Press, vol. 88(6), pages 1203-25, December. [Downloadable!] (restricted)
  8. Robert M. Solow & Frederic Y. Wan, 1976. "Extraction Costs in the Theory of Exhaustible Resources," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 359-370, Autumn. [Downloadable!] (restricted)
  9. Livernois, John R., 1987. "Empirical evidence on the characteristics of extractive technologies: The case of oil," Journal of Environmental Economics and Management, Elsevier, vol. 14(1), pages 72-86, March. [Downloadable!] (restricted)
  10. Geoffrey Heal, 1976. "The Relationship Between Price and Extraction Cost for a Resource with a Backstop Technology," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 371-378, Autumn. [Downloadable!] (restricted)
  11. Eswaran, Mukesh & Lewis, Tracy R & Heaps, Terry, 1983. "On the Nonexistence of Market Equilibria in Exhaustible Resource Markets with Decreasing Costs," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 154-67, February. [Downloadable!] (restricted)
  12. Slade, Margaret E., 1982. "Trends in natural-resource commodity prices: An analysis of the time domain," Journal of Environmental Economics and Management, Elsevier, vol. 9(2), pages 122-137, June. [Downloadable!] (restricted)
  13. Pierre Lasserre, 1985. "Capacity Choice by Mines," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 831-42, November. [Downloadable!] (restricted)
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  14. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May. [Downloadable!] (restricted)
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  15. Swierzbinski, Joseph E & Mendelsohn, Robert, 1989. "Exploration and Exhaustible Resources: The Microfoundations of Aggregate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 175-86, February. [Downloadable!] (restricted)
  16. Davis, Graham A. & Moore, David J., 1998. "Valuing mineral reserves when capacity constrains production," Economics Letters, Elsevier, vol. 60(1), pages 121-125, July. [Downloadable!] (restricted)
  17. Conrad, Robert F. & Hool, Bryce, 1981. "Resource taxation with heterogeneous quality and endogenous reserves," Journal of Public Economics, Elsevier, vol. 16(1), pages 17-33, August. [Downloadable!] (restricted)
  18. Livernois, John R & Uhler, Russell S, 1987. "Extraction Costs and the Economics of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 195-203, February.
  19. Francis Taurand & Nguyen Manh Hung, 1987. "Pitfalls in a Received Idea: Ricardian Decreasing Returns at the Extensive Margin of a Natural Resource," Canadian Journal of Economics, Canadian Economics Association, vol. 20(1), pages 61-73, February. [Downloadable!] (restricted)
  20. Weitzman, Martin L., 1976. "The optimal development of resource pools," Journal of Economic Theory, Elsevier, vol. 12(3), pages 351-364, June. [Downloadable!] (restricted)
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  21. Devarajan, Shantayanan & Fisher, Anthony C, 1982. "Exploration and Scarcity," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1279-90, December. [Downloadable!] (restricted)
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