The Cut-Off Grade and the Theory of Extraction
The cutoff grade problem arises when technological infeasibility or high cost prevents an extractive firm from exploiting a heterogeneous deposit in strict sequence. The optimal cutoff grade varies directly with anticipated changes in present value price. A stochastic price path induces a higher (lower) initial cutoff grade if the marginal profit function is concave (convex). The optimal response to an unanticipated price change depends on the difference between the rates of change in price along the new and original price paths and whether or not the firm can increase extractive capacity, including the life of the mine.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 21 (1988)
Issue (Month): 1 (February)
|Contact details of provider:|| Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4|
Web page: http://economics.ca/cje/
More information through EDIRC
|Order Information:|| Web: http://economics.ca/en/membership.php Email: |