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Pricing and Depletion of an Exhaustible Resource When There is Anticipation of Trade Disruption

Author

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  • Arye L. Hillman
  • Ngo Van Long

Abstract

This paper considers pricing and depletion of an exhaustible nonrenewable resource in an economy wherein domestic consumption is provided for by supplementing extraction from the economy's own resource stock with imports, the future supply of which is not assured. The socially optimal response to threat of trade disruption is a more conservationist depletion program for the domestic resource stock than would be called for, if import supplies were assured to persist. Competitive domestic firms adopt the socially optimal conservationist program. However, firms anticipating domestic market power after the disruption of import supplies are revealed to overextract the domestic resource stock.

Suggested Citation

  • Arye L. Hillman & Ngo Van Long, 1983. "Pricing and Depletion of an Exhaustible Resource When There is Anticipation of Trade Disruption," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 215-233.
  • Handle: RePEc:oup:qjecon:v:98:y:1983:i:2:p:215-233.
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    File URL: http://hdl.handle.net/10.2307/1885622
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    Cited by:

    1. Nkuiya, Bruno, 2015. "Transboundary pollution game with potential shift in damages," Journal of Environmental Economics and Management, Elsevier, vol. 72(C), pages 1-14.
    2. Creti, Anna & Villeneuve, Bertrand, 2008. "Equilibrium Storage in a Markov Economy," MPRA Paper 11944, University Library of Munich, Germany.
    3. repec:dau:papers:123456789/5204 is not listed on IDEAS
    4. Martin C. McGuire, 2010. "Economic Analysis and International Security," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 6(2), pages 313-346, March.
    5. repec:elg:eechap:15325_12 is not listed on IDEAS
    6. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Storage and security of supply in the medium run," Resource and Energy Economics, Elsevier, vol. 31(1), pages 24-38, January.
    7. Gérard Gaudet & Pierre Lasserre, 2011. "The Efficient Use Of Multiple Sources Of A Nonrenewable Resource Under Supply Cost Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 245-258, February.
    8. Keisaku Higashida & Yasuhiro Takarada, 2012. "Does the Acquisition of Mines Benefit Resource-Importing Countries?," Discussion Paper Series 86, School of Economics, Kwansei Gakuin University, revised Mar 2012.
    9. repec:dau:papers:123456789/2280 is not listed on IDEAS
    10. Bahel, Eric, 2011. "Optimal management of strategic reserves of nonrenewable natural resources," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 267-280, May.
    11. Behrens, Axel, 1990. "Optimal stockpiling policies for resource-dependent economies," Kiel Working Papers 437, Kiel Institute for the World Economy (IfW).
    12. Paul M. Comolli, 1986. "Exhaustible Resources and International Trade," Eastern Economic Journal, Eastern Economic Association, vol. 12(3), pages 291-296, Jul-Sep.
    13. Ngo Van Long, 2019. "Managing, Inducing, and Preventing Regime Shifts: A Review of the Literature," CESifo Working Paper Series 7749, CESifo Group Munich.
    14. repec:dau:papers:123456789/4808 is not listed on IDEAS
    15. Shengbao Ji & Yin-Fang Zhang & Tooraj Jamasb, 2014. "Reform of the Coal Sector in an Open Economy: The Case of China," Cambridge Working Papers in Economics 1445, Faculty of Economics, University of Cambridge.
    16. repec:dau:papers:123456789/5384 is not listed on IDEAS
    17. Rees, Ray & Scholz, Sebastian, 2010. "Optimal Fertility Decisions in a Life Cycle Model," Discussion Papers in Economics 11316, University of Munich, Department of Economics.

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