The Relationship Between Price and Extraction Cost for a Resource with a Backstop Technology
AbstractThis paper analyzes the optimal depletion policy for a country with a resource which is inexhaustible but available in various grades and at various costs. Cost is assumed to increase with cumulative extraction up to a point, but then to remain constant as a "backstop" supply is reached. This models accurately the supply conditions of minerals which may eventually be extracted from marine sources or crystal rocks. Emphasis is placed on the behavior of prices along an optimal (competitive) path, and it is shown that the price-cost relationship is very different from the standard one of an exponentially growing royalty.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 7 (1976)
Issue (Month): 2 (Autumn)
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RePEc Biblio mentionsAs found on the RePEc Biblio, the curated bibliography for Economics:CitEc Project, subscribe to its RSS feed for this item.
- van der Ploeg, Frederick & Withagen, Cees, 2011.
"Growth and the Optimal Carbon Tax: When to Switch from Exhaustible Resources to Renewables?,"
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- Chakravorty, Ujjayant & Krulce, Darrell & Roumasset, James, 2005. "Specialization and non-renewable resources: Ricardo meets Ricardo," Journal of Economic Dynamics and Control, Elsevier, vol. 29(9), pages 1517-1545, September.
- Ujjayant Chakravorty & Darrell Krulce & James Roumasset, 2004. "Specialization and Nonrenewable Resources: Ricardo Meets Ricardo," Working Papers 200401, University of Hawaii at Manoa, Department of Economics.
- Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.
- Toman, Michael & Krautkraemer, Jeffrey, 2003. "Fundamental Economics of Depletable Energy Supply," Discussion Papers dp-03-01, Resources For the Future.
- repec:dgr:uvatin:2010020 is not listed on IDEAS
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