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Bubbles in Prices of Exhaustible Resources

  • Boyan Jovanovic


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.

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Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 26.

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Date of creation: 2008
Date of revision:
Handle: RePEc:red:sed008:26
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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  1. 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.
  2. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 145, Princeton, Woodrow Wilson School - Development Studies.
  3. Manuel S. Santos & Michael Woodford, 1993. "Rational Asset Pricing Bubbles," Working Papers 9304, Centro de Investigacion Economica, ITAM.
  4. Kathryn Graddy & Orley Ashenfelter, 2002. "Auctions and the Price of Art," Economics Series Working Papers 131, University of Oxford, Department of Economics.
  5. Benjamin J. Burton & Joyce P. Jacobsen, 1999. "Measuring Returns on Investments in Collectibles," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 193-212, Fall.
  6. Tirole, Jean, 1985. "Asset Bubbles and Overlapping Generations," Econometrica, Econometric Society, vol. 53(6), pages 1499-1528, November.
  7. Sargent, Thomas J. & Wallace, Meil, 1983. "A model of commodity money," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 163-187.
  8. Stephen F. Le Roy, 2004. "Rational Exuberance," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 783-804, September.
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