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How Much is a Nonearning Asset with No Current Capital Gains Worth?

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  • Stephen Salant

    (University of Michigan)

  • Joshua Keller

    (City University of New York, Graduate Center)

Abstract

Throughout his career, Ngo Van Long made substantial contributions to applied economic theory. With nearly 200 articles and 8 books to his credit, his contributions span the fields of international trade, industrial organization, public finance, natural resources, and environmental economics. This paper contributes to the significant literature which developed after Long (J Econ Theory 10:42–53, 1975), an early contribution to exhaustible resource theory published in the year Long received his PhD. He deduced the optimal extraction path of an exhaustible resource when there is a risk the resource will be nationalized at an unknown time. After surveying the related literature, we deduce the implications of Long’s dynamics when the random event would raise rather than lower the competitive price of the asset. We illustrate with 3 applications: an investment project which a court might allow to commence; land with regulatory restrictions preventing development which might be rezoned for an income-generating use; and a futures contract on a currency which might be revalued before the contract expires.

Suggested Citation

  • Stephen Salant & Joshua Keller, 2024. "How Much is a Nonearning Asset with No Current Capital Gains Worth?," Dynamic Games and Applications, Springer, vol. 14(1), pages 7-19, March.
    • Handle: RePEc:spr:dyngam:v:14:y:2024:i:1:d:10.1007_s13235-023-00536-5
    DOI: 10.1007/s13235-023-00536-5
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    References listed on IDEAS

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    1. repec:dau:papers:123456789/5204 is not listed on IDEAS
    2. 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, President and Fellows of Harvard College, vol. 98(2), pages 215-233.
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    5. 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.
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    Cited by:

    1. Hassan Benchekroun & Gerhard Sorger, 2024. "Preface: Special issue of Dynamic Games and Applications in Memory of Professor Ngo Van Long," Dynamic Games and Applications, Springer, vol. 14(1), pages 1-6, March.

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