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Sectoral Supply of Minerals of Varying Quality

Author

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  • Cairns, R.
  • Lasserre, P.

Abstract

We Present a Model of a Mineral Producing Sector Where Irreversible Investment in Capacity and the Presence of Orebodies Which Differ in Quality and Volume Help Explain Some Important Stylized Facts. in Particular We Find That, While Deposits Are Exhausted in Declining Order of Grade, More Than One Grade of Ore May Be Exploited At One Time and Extraction Periods Must Overlap. the Price May Rise Or Diminish But Is Likely to Diminish At First (Young Industry) and Must Eventually Rise, Although At Less Than the Interest Rate (Unless Demand Expands Rapidly). Such Secular Trends, However, Are Associated with Short-Run Fluctuations Due to Entry and Exhaustion of Deposits. the Cyclicality of Resource Prices Is Reinforced by the Fact That Mines Keep Producing At Capacity When Price Is Falling.

Suggested Citation

  • Cairns, R. & Lasserre, P., 1985. "Sectoral Supply of Minerals of Varying Quality," Cahiers de recherche 8534, Universite de Montreal, Departement de sciences economiques.
  • Handle: RePEc:mtl:montde:8534
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    Cited by:

    1. Anthony J. Venables, 2014. "Depletion and Development: Natural Resource Supply with Endogenous Field Opening," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 1(3), pages 313-336.
    2. Martin Stürmer, 2013. "150 Years of Boom and Bust: What Drives Mineral Commodity Prices?," 2013 Papers pst529, Job Market Papers.
    3. Marvasti, Akbar, 2013. "The role of price expectations and legal uncertainties in ocean mineral, exploration activities," Resources Policy, Elsevier, vol. 38(1), pages 68-74.
    4. David Prentice, 2006. "A re-examination of the origins of American industrial success," Working Papers 2006.02, School of Economics, La Trobe University.
    5. A. Marvasti, 2000. "Resource Characteristics, Extraction Costs, and Optimal Exploitation of Mineral Resources," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 17(4), pages 395-408, December.
    6. Robert Cairns, 2001. "Capacity Choice and the Theory of the Mine," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 18(1), pages 129-148, January.
    7. Jeffrey A. Krautkraemer, 1998. "Nonrenewable Resource Scarcity," Journal of Economic Literature, American Economic Association, vol. 36(4), pages 2065-2107, December.

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