Nonrenewable Resources, Strategic Behavior and the Hotelling Rule: An Experiment
AbstractThis study uses the methods of experimental economics to investigate possible causes for the failure of the Hotelling rule for nonrenewable resources. We argue that as long as resource stocks are high enough, producers may choose to (partially) ignore the dynamic component of their production decision, shifting production to the present and focusing more on strategic behavior. We experimentally vary stock size in a nonrenewable resource duopoly setting and find that producers with high stocks indeed pay significantly less attention to variables related to dynamic optimization, leading to a failure of the Hotelling rule.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 11-014/1.
Date of creation: 21 Jan 2011
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Experiments; Nonrenewable Resources; Dynamic Oligopoly;
Find related papers by JEL classification:
- C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
- Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-26 (All new papers)
- NEP-ENE-2011-02-26 (Energy Economics)
- NEP-ENV-2011-02-26 (Environmental Economics)
- NEP-EXP-2011-02-26 (Experimental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
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