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When additional resource stocks reduce welfare

  • Benchekroun, Hassan
  • Halsema, Alex
  • Withagen, Cees

In the dominant firm model, we show that an increase of the fringe's reserves of a nonrenewable resource may lead to a decrease in aggregate discounted social welfare. This happens when the difference between the fringe's extraction cost and the dominant firm's is positive and large enough. We also show that welfare might decrease if the fringe's marginal extraction cost decreases.

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File URL: http://www.sciencedirect.com/science/article/B6WJ6-4X5JR3G-2/2/2b6a19421c3b62c7700585d67fff9f1c
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Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 59 (2010)
Issue (Month): 1 (January)
Pages: 109-114

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Handle: RePEc:eee:jeeman:v:59:y:2010:i:1:p:109-114
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622870

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  1. Gérard Gaudet & Pierre Lasserre, 2008. "The Efficient Use of Multiple Sources of a Nonrenewable Resource Under Supply Cost Uncertainty," CIRANO Working Papers 2008s-08, CIRANO.
  2. Charles F. Manson & Stephen Polasky, 1993. "Entry Deterrence In The Commons," Boston College Working Papers in Economics 209, Boston College Department of Economics.
  3. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October.
  4. Groot, A.M. & Withagen, C.A.A.M. & de Zeeuw, A.J., 1996. "Strong Time-Consistency in the Cartel-versus-Fringe Model," Discussion Paper 1996-22, Tilburg University, Center for Economic Research.
  5. Ujjayant Chakravorty & Michel Moreaux & Mabel Tidball, 2008. "Ordering the Extraction of Polluting Nonrenewable Resources," American Economic Review, American Economic Association, vol. 98(3), pages 1128-44, June.
  6. Stiglitz, Joseph E, 1981. "Potential Competition May Reduce Welfare," American Economic Review, American Economic Association, vol. 71(2), pages 184-89, May.
  7. 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.
  8. BENCHEKROUN, Hassan & HALSEMA, Alex & WITHAGEN, Cees, 2008. "On Nonrenewable Resource Oligopolies : The Asymmetric Case," Cahiers de recherche 13-2008, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Chakravorty, Ujjayant & Krulce, Darrell L, 1994. "Heterogeneous Demand and Order of Resource Extraction," Econometrica, Econometric Society, vol. 62(6), pages 1445-52, November.
  10. Kemp, Murray C & Long, Ngo Van, 1980. "On Two Folk Theorems Concerning the Extraction of Exhaustible Resources," Econometrica, Econometric Society, vol. 48(3), pages 663-73, April.
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