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Exploitation and Recycling of Exhaustible Resources: The Case of Rare Earths and Phosphorus

Author

Listed:
  • Bocar Samba Ba

    (Centre d'Etudes et de Recherches sur le Développement International (CERDI))

  • Raphaël Soubeyran

    (Institut National de Recherches Agronomiques (INRA) de Montpellier (LAMETA))

Abstract

We study the exploitation of recyclable exhaustible resources such as rare earths and Phosphorus. We use a standard Hotelling model of resource exploitation that includes a primary sector and a recycling sector. We show that, when the primary sector is competitive, the price of the recyclable resource increases through time. This result stands in contrast to durable resources, for which the optimal price path is either decreasing or U-shaped. We then show a new reason why the price of an exhaustible resource may decrease: when the primary sector is monopolistic, the primary producer has incentives to delay its production activities in order to delay recycling. As a consequence, the price path of the recyclable resource may be U-shaped. We also show that a technological improvement in the recycling sector increases the price in the short term but decreases it later.

Suggested Citation

  • Bocar Samba Ba & Raphaël Soubeyran, 2017. "Exploitation and Recycling of Exhaustible Resources: The Case of Rare Earths and Phosphorus," Working Papers 2017.01, FAERE - French Association of Environmental and Resource Economists.
    • Handle: RePEc:fae:wpaper:2017.01
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    File URL: http://faere.fr/pub/WorkingPapers/Ba_Soubeyran_FAERE_WP2017_01.pdf
    File Function: First version, 2017
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    More about this item

    Keywords

    Rare earths; Phosphorus; Recycling; Competition; Optimal control;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices

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