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Monopoly extraction of an exhaustible resource with two markets

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  • Carolyn Fischer
  • Ramanan Laxminarayan

Abstract

. Although much has been written about monopoly extraction of natural resources, the case of a resource being sold in two separate markets has escaped notice. We find that a monopolist facing two different iso‐elastic demand schedules extracts more rapidly than the social planner, whether or not arbitrage prevents price discrimination between markets. JEL classification: D42, Q3 Extraction monopoliste d’une ressource épuisable quand il y a deux marchés. Même si l’on a écrit beaucoup à propos de l’extraction monopoliste de ressources naturelles épuisables, il semble que le cas d’une ressource vendue dans deux marchés séparés n’a pas été traité. On découvre qu’un monopoleur faisant face à deux cédules de demande iso‐élastiques différentes extrait la ressource plus rapidement que le planificateur social, que l’arbitrage entre les marchés empêche ou non la discrimination par les prix.

Suggested Citation

  • Carolyn Fischer & Ramanan Laxminarayan, 2004. "Monopoly extraction of an exhaustible resource with two markets," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(1), pages 178-188, February.
    • Handle: RePEc:wly:canjec:v:37:y:2004:i:1:p:178-188
    DOI: 10.1111/j.0008-4085.2004.009_1.x
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    References listed on IDEAS

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    1. Lewis, Tracy R & Matthews, Steven A & Burness, H Stuart, 1979. "Monopoly and the Rate of Extraction of Exhaustible Resources: Note," American Economic Review, American Economic Association, vol. 69(1), pages 227-230, March.
    2. Gaudet, Gerard & Lasserre, Pierre, 1988. "On comparing monopoly and competition in exhaustible resource exploitation," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 412-418, December.
    3. Robert M. Solow, 1974. "The Economics of Resources or the Resources of Economics," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 12, pages 257-276, Palgrave Macmillan.
    4. Eswaran, Mukesh & Lewis, Tracy R., 1984. "Ultimate recovery of an exhaustible resource under different market structures," Journal of Environmental Economics and Management, Elsevier, vol. 11(1), pages 55-69, March.
    5. Stiglitz, Joseph E, 1976. "Monopoly and the Rate of Extraction of Exhaustible Resources," American Economic Review, American Economic Association, vol. 66(4), pages 655-661, September.
    6. 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.
    7. Pindyck, Robert S., 1987. "On monopoly power in extractive resource markets," Journal of Environmental Economics and Management, Elsevier, vol. 14(2), pages 128-142, June.
    8. Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.
    9. Lewis, Tracy R., 1976. "Monopoly exploitation of an exhaustible resource," Journal of Environmental Economics and Management, Elsevier, vol. 3(3), pages 198-204, October.
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    Cited by:

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    7. Vicknair, David & Tansey, Michael & O'Brien, Thomas E., 2022. "Measuring fossil fuel reserves: A simulation and review of the U.S. Securities and Exchange Commission approach," Resources Policy, Elsevier, vol. 79(C).

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    More about this item

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • Q3 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation

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