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Increasing Extraction Costs and Resource Prices: Some Further Results

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  • Donald A. Hanson

Abstract

There has been considerable interest concerning the form of the efficiency price path when extraction costs increase over time. This paper presents a reasonable condition on the distribution of resources among cost grades which implies that the efficiency path is concave, with a relatively high initial price but a declining growth of price, and that the scarcity rent path decreases monotonically. The average scarcity rent path decreases monotonically. The average scarcity rent is also explicitly determined. Finally, a measure of resource scarcity is obtained on the basis of the current efficient competitive price of the resource.

Suggested Citation

  • Donald A. Hanson, 1980. "Increasing Extraction Costs and Resource Prices: Some Further Results," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 335-342, Spring.
  • Handle: RePEc:rje:bellje:v:11:y:1980:i:spring:p:335-342
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    References listed on IDEAS

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    1. Samet, Dov & Tauman, Yair, 1982. "The Determination of Marginal Cost Prices under a Set of Axioms," Econometrica, Econometric Society, vol. 50(4), pages 895-909, July.
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    Cited by:

    1. Moustapha Pemy, 2016. "Optimal Extraction and Taxation of Strategic Natural Resources: A Differential Game Approach," Papers 1611.02547, arXiv.org.
    2. Amigues, Jean-Pierre & Moreaux, Michel, 2016. "The Joint Dynamics of the Energy Mix, Land Uses and Energy Efficiency Rates During the Transition Toward the Green Economy," TSE Working Papers 16-625, Toulouse School of Economics (TSE).
    3. Hoel, Michael & Jensen, Svenn, 2012. "Cutting costs of catching carbon—Intertemporal effects under imperfect climate policy," Resource and Energy Economics, Elsevier, vol. 34(4), pages 680-695.
    4. Hart, Rob, 2016. "Non-renewable resources in the long run," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 1-20.
    5. Endress, Lee H. & Roumasset, James A. & Zhou, Ting, 2005. "Sustainable growth with environmental spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 58(4), pages 527-547, December.
    6. Hotel, Michael, 2008. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," Memorandum 29/2008, Oslo University, Department of Economics.
    7. Halvorsen, Robert & Smith, Tim R, 1984. "On Measuring Natural Resource Scarcity," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 954-964, October.
    8. Moustapha Pemy, 2016. "Optimal Resource Extraction in Regime Switching L\'evy Markets," Papers 1606.03388, arXiv.org, revised Nov 2016.
    9. Michael Hoel, 2008. "Bush Meets Hotelling: Effects of Improved Renewable Energy Technology on Greenhouse Gas Emissions," CESifo Working Paper Series 2492, CESifo Group Munich.
    10. Ronald H. Schmidt, 1988. "Hotelling's rule repealed? An examination of exhaustible resource pricing," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 41-54.
    11. Amigues, Jean-Pierre & Moreaux, Michel, 2016. "Pollution Abatement v.s. Energy Efficiency Improvements," TSE Working Papers 16-626, Toulouse School of Economics (TSE).
    12. Amigues, Jean-Pierre & Moreaux, Michel, 2016. "From Primary Resources to Useful Energy: The Pollution Ceiling Efficiency Paradox," TSE Working Papers 16-624, Toulouse School of Economics (TSE).
    13. Pickering, Andrew, 2008. "The oil reserves production relationship," Energy Economics, Elsevier, vol. 30(2), pages 352-370, March.
    14. Jouvet, Pierre-André & Schumacher, Ingmar, 2012. "Learning-by-doing and the costs of a backstop for energy transition and sustainability," Ecological Economics, Elsevier, vol. 73(C), pages 122-132.
    15. James Roumasset & Kimberly Burnett & Hua Wang, 2007. "Is China’s Growth Sustainable?," Working Papers 200723, University of Hawaii at Manoa, Department of Economics.
    16. Ghandi, Abbas & Lin, C.-Y. Cynthia, 2012. "Do Iran’s buy-back service contracts lead to optimal production? The case of Soroosh and Nowrooz," Energy Policy, Elsevier, vol. 42(C), pages 181-190.
    17. Lin, C.Y. Cynthia, 2009. "An Empirical Dynamic Model of OPEC and Non-OPEC," Working Papers 225895, University of California, Davis, Department of Agricultural and Resource Economics.
    18. Michael Hoel, 2010. "Climate Change and Carbon Tax Expectations," CESifo Working Paper Series 2966, CESifo Group Munich.

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