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Resource Use When Demand is Interdependent Over Time

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  • R. MANNING

Abstract

Optimal consumption programmes are characterized for a naturally renewable, and a non‐renewable, resource when a parameter determining instantaneous utility depends on cumulated past consumption. Unlike conventional results, optimal consumption may increase over time. Conditions for this are given. For both types of resource it is shown that a free good is not necessarily consumed to the limit of availability, even though non‐satiation appears to hold. Each problem may be interpreted to be about the use of a poluting resource (like uranium), and it then reflects basic physical laws.

Suggested Citation

  • R. Manning, 1978. "Resource Use When Demand is Interdependent Over Time," The Economic Record, The Economic Society of Australia, vol. 54(1), pages 72-77, April.
    • Handle: RePEc:bla:ecorec:v:54:y:1978:i:1:p:72-77
    DOI: 10.1111/j.1475-4932.1978.tb00317.x
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    References listed on IDEAS

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    1. Keeler, Emmett & Spence, Michael & Zeckhauser, Richard, 1972. "The optimal control of pollution," Journal of Economic Theory, Elsevier, vol. 4(1), pages 19-34, February.
    2. Orris C. Herfindahl, 1955. "Some Fundamentals of Mineral Economics," Land Economics, University of Wisconsin Press, vol. 31(2), pages 131-138.
    3. Harl E. Ryder & Geoffrey M. Heal, 1973. "Optimal Growth with Intertemporally Dependent Preferences," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(1), pages 1-31.
    4. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    5. Vousden, Neil, 1973. "Basic theoretical issues of resource depletion," Journal of Economic Theory, Elsevier, vol. 6(2), pages 126-143, April.
    6. Long, Ngo Van, 1974. "The Theory of the Mining Firm and the Optimal Extraction of a Non-renewable Resource," Australian Economic Papers, Wiley Blackwell, vol. 13(23), pages 293-297, December.
    7. Pollak, Robert A, 1970. "Habit Formation and Dynamic Demand Functions," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 745-763, Part I Ju.
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    Cited by:

    1. Daniel Leonard, 1990. "Richard Manning 1943–1989," The Economic Record, The Economic Society of Australia, vol. 66(2), pages 171-174, June.

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