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Is Recycling a Threat or an Opportunity for the Extractor of an Exhaustible Resource?

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  • Bocar Samba Ba

    () (Université Clermont Auvergne)

  • Philippe Mahenc

    () (CEE-M, Univ Montpellier)

Abstract

We examine the best extraction strategies for the provider of an exhaustible resource that can be recycled. In a two-period model of resource extraction, the extractor faces prospective entry by a recycler that incurs a fixed cost to produce a perfect substitute of the virgin resource. Its entry is an opportunity or a threat for the extractor, depending on whether it maximizes social welfare or its own revenue. Our results highlight how prospective recycling modifies the Hotelling rule. We characterize various entry possibilities. The benevolent extractor may accommodate or promote recycling, while the self-interested extractor may accommodate or deter recycling.

Suggested Citation

  • Bocar Samba Ba & Philippe Mahenc, 2019. "Is Recycling a Threat or an Opportunity for the Extractor of an Exhaustible Resource?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1109-1134, August.
  • Handle: RePEc:kap:enreec:v:73:y:2019:i:4:d:10.1007_s10640-018-0293-1
    DOI: 10.1007/s10640-018-0293-1
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    Cited by:

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    2. Lafforgue, Gilles & Rouge, Luc, 2019. "A dynamic model of recycling with endogenous technological breakthrough," Resource and Energy Economics, Elsevier, vol. 57(C), pages 101-118.
    3. Fabre, Adrien & Fodha, Mouez & Ricci, Francesco, 2020. "Mineral resources for renewable energy: Optimal timing of energy production," Resource and Energy Economics, Elsevier, vol. 59(C).

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    More about this item

    Keywords

    Entry; Exhaustible resource; Hotelling rule; Ramsey formula; Recycling;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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