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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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    Citations

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    Cited by:

    1. Knut Einar Rosendahl & Diana Roa Rubiano, 2019. "How Effective is Lithium Recycling as a Remedy for Resource Scarcity?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 985-1010, November.
    2. 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).
    3. Ba, Bocar Samba & Soubeyran, Raphael, 2023. "Hotelling and recycling," Resource and Energy Economics, Elsevier, vol. 72(C).
    4. Zhou, Sophie & Smulders, Sjak, 2021. "Closing the loop in a circular economy: Saving resources or suffocating innovations?," European Economic Review, Elsevier, vol. 139(C).
    5. Terreaux, Jean-Philippe, 2022. "The rise and fall of La Graufesenque: The fate of development based on a non-renewable resource," Ecological Economics, Elsevier, vol. 196(C).
    6. 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.
    7. Diana Roa & Knut Einar Rosendahl, 2023. "Policies for Material Circularity: the Case of Lithium," Circular Economy and Sustainability,, Springer.
    8. Belleflamme, Paul & Ha, Huan, 2021. "Improving recycling: How far should we go?," LIDAM Discussion Papers CORE 2021009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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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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