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Once-and-for-All Costs and Exhaustible Resource Markets

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  • Fischer, Carolyn

    (Resources for the Future)

Abstract

This paper analyzes the impact on exhaustible resource markets of setup or shutdown costs, a sparsely analyzed category of nonconvex production technologies. This paper proves that, even under idealized circumstances for competition, a competitive equilibrium will fail to exist in the presence of setup costs, for any utility and cost functions such that a planner would exploit exhaustible resource pools sequentially.

Suggested Citation

  • Fischer, Carolyn, 1998. "Once-and-for-All Costs and Exhaustible Resource Markets," RFF Working Paper Series dp-98-25, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-98-25
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    File URL: http://www.rff.org/RFF/documents/RFF-DP-98-25.pdf
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    References listed on IDEAS

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    1. Lewis, Tracy R & Matthews, Steven A & Burness, H Stuart, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 227-230, March.
    2. Anthony Fisher & Larry Karp, 1993. "Nonconvexity, efficiency and equilibrium in exhaustible resource depletion," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(1), pages 97-106, February.
    3. Tullock, Gordon, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 231-233, March.
    4. Eswaran, Mukesh & Lewis, Tracy R & Heaps, Terry, 1983. "On the Nonexistence of Market Equilibria in Exhaustible Resource Markets with Decreasing Costs," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 154-167, February.
    5. Lozada, Gabriel A., 1996. "Existence of equilibria in exhaustible resource industries Nonconvexities and discrete vs. continuous time," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 433-444.
    6. Mumy, Gene E, 1984. "Competitive Equilibria in Exhaustible Resource Markets with Decreasing Costs: A Comment on Eswaran, Lewis, and Heaps's Demonstration of Nonexistence," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1168-1174, December.
    7. Hartwick, John M. & Kemp, Murray C. & Van Long, Ngo, 1986. "Set-up costs and theory of exhaustible resources," Journal of Environmental Economics and Management, Elsevier, vol. 13(3), pages 212-224, September.
    8. Kimmel, Sheldon, 1984. "A Note on Extraction with Nonconvex Costs [On the Nonexistence of Market Equilibria in Exhaustible Resource Markets with Decreasing Costs]," Journal of Political Economy, University of Chicago Press, vol. 92(6), pages 1158-1167, December.
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    Cited by:

    1. Eduardo Ley & Molly K. Macauley & Stephen W. Salant, "undated". "Spatially and intertemporally efficient waste management: The costs of interstate flow control," Working Papers 97-07, FEDEA.
    2. Ley, Eduardo & Macauley, Molly K. & Salant, Stephen W., 2002. "Spatially and Intertemporally Efficient Waste Management: The Costs of Interstate Trade Restrictions," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 188-218, March.

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