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Resource Extraction, Uncertainty, and Learning

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  • Michael Hoel

Abstract

This paper analyzes resource extraction when the true size of the reserves and the future costs of extraction are uncertain. The effects of increased uncertainty are investigated under the assumption that the extraction process yields information about the variables which are uncertain at the initial planning time. Mean-stock-preserving and mean-cost-preserving increases in uncertainty affect the initial resource extraction rate differently. Mean-utility-preserving increases in uncertainty do not affect the initial rate of extraction.

Suggested Citation

  • Michael Hoel, 1978. "Resource Extraction, Uncertainty, and Learning," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 642-645, Autumn.
  • Handle: RePEc:rje:bellje:v:9:y:1978:i:autumn:p:642-645
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    Cited by:

    1. Devarajan, Shantayanan & Fisher, Anthony C, 1981. "Hotelling's "Economics of Exhaustible Resources": Fifty Years Later," Journal of Economic Literature, American Economic Association, vol. 19(1), pages 65-73, March.
    2. Thompson, Andrew C., 2001. "The Hotelling Principle, backwardation of futures prices and the values of developed petroleum reserves -- the production constraint hypothesis," Resource and Energy Economics, Elsevier, vol. 23(2), pages 133-156, April.
    3. 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.
    4. Jakobsson, Kristofer & Söderbergh, Bengt & Snowden, Simon & Li, Chuan-Zhong & Aleklett, Kjell, 2012. "Oil exploration and perceptions of scarcity: The fallacy of early success," Energy Economics, Elsevier, vol. 34(4), pages 1226-1233.
    5. Catherine Bobtcheff, 2011. "Optimal Dynamic Management of a Renewable Energy Source under Uncertainty," Annals of Economics and Statistics, GENES, issue 103-104, pages 143-172.
    6. Christopher Costello & Charles D. Kolstad, 2015. "Mining and Quasi-Option Value," NBER Working Papers 21325, National Bureau of Economic Research, Inc.
    7. Agbo, Maxime, 2014. "Strategic exploitation with learning and heterogeneous beliefs," Journal of Environmental Economics and Management, Elsevier, vol. 67(2), pages 126-140.
    8. Diekert, Florian K., 2017. "Threatening thresholds? The effect of disastrous regime shifts on the non-cooperative use of environmental goods and services," Journal of Public Economics, Elsevier, vol. 147(C), pages 30-49.

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