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Bubbles In Prices Of Exhaustible Resources

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  • Jovanovic, Boyan

Abstract

Aside from the equilibrium that Hotelling (1931) displayed, his model of non-renewable resources also contains a continuum of bubble equilibria. In all the equilibria the price of the resource rises at the rate of interest. In a bubble equilibrium, however, the consumption of the resource peters out, and a positive fraction of the original stock continues to be traded forever. And that may well be happening in the market for high-end Bordeaux wines.

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Bibliographic Info

Paper provided by American Association of Wine Economists in its series Working Papers with number 45830.

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Date of creation: Nov 2008
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Handle: RePEc:ags:aawewp:45830

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Web page: http://www.wine-economics.org
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Keywords: wine; exhaustible resource; bubble; Research Methods/ Statistical Methods; Resource /Energy Economics and Policy;

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References

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  1. Kathryn Graddy & Orley Ashenfelter, 2002. "Auctions and the Price of Art," Economics Series Working Papers 131, University of Oxford, Department of Economics.
  2. Stephen F. Le Roy, 2004. "Rational Exuberance," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 783-804, September.
  3. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
  4. Deaton, Angus & Laroque, Guy, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 1-23, January.
  5. Benjamin J. Burton & Joyce P. Jacobsen, 1999. "Measuring Returns on Investments in Collectibles," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 193-212, Fall.
  6. Thomas J. Sargent & Neil Wallace, 1983. "A model of commodity money," Staff Report 85, Federal Reserve Bank of Minneapolis.
  7. Timmermann, Allan, 1994. "Present value models with feedback : Solutions, stability, bubbles, and some empirical evidence," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1093-1119, November.
  8. Manuel S. Santos & Michael Woodford, 1993. "Rational Asset Pricing Bubbles," Working Papers 9304, Centro de Investigacion Economica, ITAM.
  9. Champ,Bruce & Freeman,Scott & Haslag,Joseph, 2011. "Modeling Monetary Economies," Cambridge Books, Cambridge University Press, number 9780521177009, November.
  10. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, number 9780521297615, November.
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Cited by:
  1. James D. Hamilton, 2008. "Understanding Crude Oil Prices," NBER Working Papers 14492, National Bureau of Economic Research, Inc.
  2. David Lopez-Salido & Oscar Arce, 2008. "Housing Bubbles," 2008 Meeting Papers 134, Society for Economic Dynamics.
  3. Gourinchas, Pierre-Oliver & Farhi, Emmanuel & Caballero, Ricardo J., 2008. "Financial Crash, Commodity Prices, and Global Imbalances," Scholarly Articles 3229095, Harvard University Department of Economics.
  4. Dimson, E. & Spaenjers, C., 2009. "Ex-Post: The Investment Performance of Collectible Stamps," Discussion Paper 2009-64, Tilburg University, Center for Economic Research.
  5. Strand, Jon, 2010. "Optimal fossil-fuel taxation with backstop technologies and tenure risk," Energy Economics, Elsevier, vol. 32(2), pages 418-422, March.
  6. Spaenjers, C., 2011. "Essays in alternative investments," Open Access publications from Tilburg University urn:nbn:nl:ui:12-4944288, Tilburg University.
  7. Jie Zheng, 2008. "Strong Bubbles and Common Expected Bubbles in a Finite Horizon Model," Levine's Working Paper Archive 814577000000000038, David K. Levine.
  8. Rolf Golombek & Alfonso A. Irarrazabal & Lin Ma, 2013. "OPEC's Market Power: An Empirical Dominant Firm Model for the Oil Market," CESifo Working Paper Series 4512, CESifo Group Munich.
  9. Dimson, Elroy & Rousseau, Peter L. & Spaenjers, Christophe, 2013. "The Price of Wine," Working Papers 164656, American Association of Wine Economists.

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