Bubbles In Prices Of Exhaustible Resources
Aside from the equilibrium that Hotelling (1931) displayed, his model of non-renewable resources also contains a continuum of bubble equilibria. In all the equilibria the price of the resource rises at the rate of interest. In a bubble equilibrium, however, the consumption of the resource peters out, and a positive fraction of the original stock continues to be traded forever. And that may well be happening in the market for high-end Bordeaux wines.
References listed on IDEAS
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- Deaton, A. & Laroque, G., 1989.
"On The Behavior Of Commodity Prices,"
145, Princeton, Woodrow Wilson School - Public and International Affairs.
- Manuel S. Santos & Michael Woodford, 1993.
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- Timmermann, Allan, 1994. "Present value models with feedback : Solutions, stability, bubbles, and some empirical evidence," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1093-1119, November.
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