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Does the Acquisition of Mines Benefit Resource-Importing Countries?

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  • Keisaku Higashida

    ()
    (School of Economics, Kwansei Gakuin University)

  • Yasuhiro Takarada

    ()
    (Faculty of Policy Studies, Nanzan University)

Abstract

Using a simple two-period model, this paper examines the effects of the acquisition of mines/resources by a final goods producer located in a resource-importing country on resource prices in both the first (the present) and second (the future) periods, profits of firms, and welfare. We find that an increase in the mines owned by a final goods producer can increase the resource price in the first period and/or, interestingly, the second period. The strategic behavior of a resource-extracting firm located in a resource-exporting country produces this result. Whether the resource price increases in either period depends on the demand structure for the final goods and the resource supply condition of the final goods producer which owns the mines in the second period. We also consider three extended situations: joint exploration, entry of speculators, and the case of a non-committed investment.

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File URL: http://192.218.163.163/RePEc/pdf/kgdp86.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 86.

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Length: 32 pages
Date of creation: Mar 2012
Date of revision: Mar 2012
Handle: RePEc:kgu:wpaper:86

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Keywords: Acquisition of mines; resource exploitation; governments' support;

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  1. Mason, Charles F., 2011. "On stockpiling natural resources," Resource and Energy Economics, Elsevier, vol. 33(2), pages 398-409, May.
  2. Tobias Rötheli, 1995. "Expectations about change in market structure and natural resource extraction," Journal of Economics, Springer, vol. 62(2), pages 203-214, June.
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  8. Timothy J. Considine, 2006. "Is the Strategic Petroleum Reserve our Ace in the Hole?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 91-112.
  9. Wei, Yi-Ming & Wu, Gang & Fan, Ying & Liu, Lan-Cui, 2008. "Empirical analysis of optimal strategic petroleum reserve in China," Energy Economics, Elsevier, vol. 30(2), pages 290-302, March.
  10. Gilbert, Richard J. & Goldman, Steven M., 1978. "Potential competition and the monopoly price of an exhaustible resource," Journal of Economic Theory, Elsevier, vol. 17(2), pages 319-331, April.
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  12. Sadorsky, Perry A., 1992. "Industry size and 'destructive competition' in cournot oligopoly models of exhaustible resource exploration and extraction," Resources and Energy, Elsevier, vol. 14(3), pages 249-257, September.
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