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Adjusting prices for volume: a test of the Hotelling valuation principle

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  • Berck, Peter

Abstract

This paper tests the hypothesis that the net of extraction cost price of a natural resource does not change with volume. The hypothesis is shown to he a consequence of Hotelling’s theory. The tests are performed on equations estimated by a nonparametric regression (ACE), and we show that the usual least squares estimation techniques are not general enough to successfully perform the test. The test rejects the pure form of the Hotelling theory and shows that it is necessary to adjust sale prices for volume sold.

Suggested Citation

  • Berck, Peter, 1988. "Adjusting prices for volume: a test of the Hotelling valuation principle," CUDARE Working Papers 43665, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:43665
    DOI: 10.22004/ag.econ.43665
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