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On Coase and Hotelling

  • Juan-Pablo Montero


    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

  • Matti Liski

It has been long recognized that an exhaustible-resource monopsonist faces a commitment problem similar to that of a durable-good monopolist. Indeed, Hörner and Kamien (2004) demonstrate that the two problems are formally equivalent under full commitment. We show that there is no such equivalence in the absence of commitment. The existence of a choke price at which the monopsonist adopts the substitute (backstop) supply divides the surplus between the buyer and the sellers in a way that is unique to the resource model. Resource sellers receive a surplus share independently of their cost heterogeneity; a result in sharp contrast with the durable-good monopoly logic. The resource buyer can distort the equilibrium through delayed purchases, but the Coase conjecture arises under extreme patience (zero discount rate).

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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 351.

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Date of creation: 2009
Date of revision:
Handle: RePEc:ioe:doctra:351
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