a contingent claims analysis of optimal investment subsidy this paper uses contingent claims analysis to answer two questions i why are some subsidy markets apparently slow in attracting an optimal subsidy when others are not and ii what can be done about it the lack of activity in the green investment subsidy markets has been a concern as it appears optimal that countries should offer such support from a welfare point of view but progress has nonetheless been stalling which motivates this paper we show that free riding which is likely to affect the green subsidy market cools down the subsidy market with harmful welfare effects and preemption which is likely to affect the more active fdi subsidy market overheats the subsidy market with similarly harmful effects the theory dictates a taxation scheme that offsets these effects to restore the welfare to its maximum point

exploration and extraction in a duopoly exhaustible resource market exploration for an exhaustible natural resource is valuable because it produces information about the resource stock i model a duopoly exhaustible resource industry with imperfect information about stock size as a two period game where each period is made up of an exploration stage and an extraction stage i derive the value of gaining information about stock size prior to committing to an extraction plan both for the exploring firm and for the rival i show that an exploring firm would prefer on average to keep exploration information private but that industry profit is higher when information is made public le processus d e xploration et d extraction dans un marche de ressource naturelle non renouvelable oui il y a un duopole le processus d exploration est utile parce qu il permet de produire des renseignements quant a la taille du stock d une ressource naturelle non renouvelable l auteur examine un modele de duopole dans un jeu a deux p6riodes pour une industrie de ressource naturelle non renouvelable l information est imparfaite quant a la taille du stock de resource et chacune des deux p6riodes a un stage d exploration et un stage d extraction l auteur d6rive la valeur de l information additionnelle qujant a la taille du stock de ressource avant de s etngager dans un plan d extraction a la fois pour l entreprise exploratrice et pour l entreprise rivale on montre que l enterprise exploratrice va pr6f6rer en moyenne garder l information priv6e mais que les profits dans l industrie sont plus 6lev6s quand l information est rendue publique

some nonlinear tax effects on asset values and investment decisions under uncertainty abstract tax system nonlinearities are often ignored but with uncertainty may have important implications for the magnitude and direction of tax effects this paper studies a particular nonlinear tax rule the policy subsidizes asset values but may discourage some investments and encourage earlier shutdown of some projects the marginal effective tax rate varies with project risk furthermore a corporate cash flow tax can encourage investment due to interactions with the nonlinear policy the paper also presents a general statement of the stochastic equilibrium valuation method which can be used to analyze other nonlinear taxes numerical examples demonstrate computational feasibility

nonrenewable resource scarcity nonrenewable resource theory often is summarized by hotelling s rule this paper reviews theoretical extensions and empirical investigations of resource extraction models observed data are often inconsistent with the hotelling rule suggesting that other characteristics of nonrenewable resource supply including exploration heterogeneous ore quality technological progress and capital investment are important determinants of the dynamic behavior of resource prices given the persistent recurrence of concern about nonrenewable resource scarcity measures of nonrenewable resource scarcity and the empirical evidence for the time trends of those measures are reviewed finally the implications of nonrenewable resource scarcity for economic growth are examined

collective bargaining firm size and pensions in canada abstract the following paper analyzes the provision of job related pensions in canada the empirical results indicate that both unions and firm size have significant effects on the distribution of pensions the significance of unions on the provision of pensions does decline as firm size increases

comparative equilibrium versus comparative statics two approaches are often used to analyse the effects of uncertainty upon individual decision making the comparative equilibrium approach compares an uncertain model with a certainty model usually with the random variable replaced by its mean the comparative statics approach introduces more uncertainty into an already uncertain model and considers the effects upon optimal decisions this paper demonstrates that these two approaches are qualitatively equivalent for the class of models where uncertainty is completely exogenous to the decision maker when individual decisions affect this uncertainty the two analyses are generally qualitatively different an example of each type of model is presented followed by a general analysis

equilibrium valuation of natural resources the purpose of this paper is to provide a theoretical investigation of equilibrium spot and futures price behavior in a nonrenewable commodity market the underlying commodity is nonrenewable in the sense that the reserve level of the commodity is expected to decline over time in the absence of successful discoveries of additional reserves i wish to understand how the nonrenewable nature of the commodity influences the intertemporal extraction of the commodity equilibrium spot price behavior and the prices of derivative assets traded on the nonrenewable commodity there is considerable disagreement among economists whether resources are exhaustible in the sense of resource constraints becoming binding on our society in the foreseeable future some economists have argued that natural resources are being depleted at

the elephant in hotelling s room this paper questions the assumption commonly used in theoretical and policy research that scarcity rents make up a large proportion of market prices for oil and coal we show that the empirical literature simple calculations of historical and future scarcity rent shares and possible theoretical explanations all imply the same overall conclusions that scarcity rents seem to have been marginal or non existent historically that they almost certainly do not dominate fossil resource prices today and that there will be other factors shaping the prices in the upcoming decades we therefore argue that using the scarcity rent as the main or only basis for policy or for explaining empirical outcomes is ill advised

reserve and land prices with exploration under uncertainty abstract arrow and chang j econom environ manag 9 1 10 1982 analyze an exploration extraction model with uncertainty about the distribution of deposits reserve prices do not exhibit any rising trend when the unexplored land area is big but in order to know what happens when the unexplored area is smaller a probabilistic analysis not yet performed ibid p 10 is required their conjecture of a rising trend at less than the discount rate is confirmed however land prices can be expected to grow faster than reserve prices which helps discriminate between arrow and chang s and other rationalizations of the failure of resource prices to rise at the discount rate

the risk of policy tipping and stranded carbon assets if global warming is to stay below 2 c there are four risks of assets stranding first substantial fossil fuel reserves will be stranded at the end of the fossil era second this is true for exploration capital too third unanticipated changes in present or expected climate policy cause discrete jumps in today s valuation of physical and natural capital fourth if timing and intensity of climate policy are uncertain revaluation of assets occurs as uncertainty about future climate policy is resolved to highlight these four effects we use an analytical model of investment in exploration capital with intertemporal adjustment costs reserves depletion and market capitalization and calibrate it to the global oil and gas industry climate policy implements a carbon budget commensurate with 2 c peak warming and we allow for immediate or delayed carbon taxes and renewable subsidies the social welfare ranking of these instruments is inverse to that of the oil and gas industry which prefers renewable subsidy and delaying taxes for as long as possible we also pay attention to how the legislative risk of tipping into policy action affects the timing of the end of the fossil era the profitability of existing capital and green paradox effects

how to maximize domestic benefits from foreign investments the effect of irreversibility and uncertainty when a foreign monopolist facing uncertain future demand can either export to a host country or serve the market by undertaking an irreversible foreign direct investment the host government maximizes net domestic benefits by nearly fully subsidizing the investment cost in combination with taxing away benefits that exceed the gains from exporting without the subsidy maximization of domestic benefits leads to underinvestment from a world welfare point of view

the interaction of debt financing cash grants and the optimal investment policy under uncertainty abstract significant progress has been made toward understanding a levered firm s optimal investment policy under uncertainty to date however not much work has concentrated on the time scale trade off and collectively held real options we employ a game theoretic real option model between a firm and a government to analyze the effect of uncertainty and investment stimulus in the form of cash grants on optimal investment timing financing and investment scaling we find that the jointly held real option between the firm and the government leads to underinvestment regardless of whether the firm has the possibility to issue debt subsidies however reduce the level of underinvestment notably the results indicate that even though levered firms receive less support they invest more than unlevered firms this challenges recent findings that a firm s optimal investment level is not affected by the way it finances a project similarly we find that for realistic parameter constellations the levered firm s optimal investment threshold can be higher than that of its unlevered counterpart this indicates that the availability of tax shield benefits does not necessarily serve as an incentive to invest earlier finally we show that the effect of cash flow uncertainty on the equilibrium level of grants is ambiguous and triggers the switch from a subsidy to non subsidy regime

decreasing absolute risk aversion and utility indices derived from cake eating problems abstract this paper establishes the following characterization of decreasing absolute risk aversion dara utility indices j exhibits dara if and only if it is the indirect function corresponding to an infinite horizon cake eating problem for some nondecreasing and concave utility function of consumption the characterization is applied to the analysis of resource extraction under uncertainty and to an inverse optimal problem

the supply of non renewable resources there exists no formal treatment of non renewable resource nrr supply systematically deriving quantity as function of price we establish instantaneous restricted fixed reserves and unrestricted nrr supply functions the supply of a nrr at any date and location not only depends on the local contemporary price of the resource but also on prices at all other dates and locations besides the usual law of supply which characterizes the own price effect cross price effects have their own law they can be decomposed into a substitution effect and a stock compensation effect we show that the substitution effect always dominates a price increase at some point in space and time causes nrr supply to decrease at all other points this new but orthodox supply setting extends to nrrs the partial equilibrium analysis of demand and supply policies thereby it provides a generalization of many results about policy induced changes on nrr markets the properties of restricted and unrestricted supply functions are characterized for hotelling homogeneous as well as ricardian non homogeneous reserves for a single deposit as well as for several deposits that endogenously come into production or cease to be active

natural resource economics under the rule of hotelling abstract natural resource stocks held in situ are physical assets equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere i discuss a number of factors relating to the evolution of extraction costs to the durability of the resource to market structure and to uncertainty that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks the emphasis is put on how those factors can potentially help bridge the gap between the basic hotelling s rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources i also highlight some theoretical and empirical issues that need further attention

an exploration of alternative measures of natural resource scarcity the case of petroleum resources in the u s abstract the concern about natural resource scarcity has traditionally focused on changes in the cost quality and availability of energy and material inputs to the production process ecological economists are increasingly concerned with an additional aspect of scarcity the growing scarcity of environmental services that sustain human economic existence the analysis here explores economic and biophysical indicators of natural resource scarcity the indices are quantified for the extraction of petroleum resources in the u s the economic indicators are the market price of crude oil and natural gas the unit capital plus labor cost of extraction and the average total cost of extraction dollars per btu extracted the biophysical index is the energy return on investment eroi all indices show a trend of decreasing and then increasing scarcity of petroleum at the wellhead the economic and biophysical cost indices indicate that the 1960s marked the transition from a decreasing to an increasing cost resource base the market price of oil is influenced by nonscarcity forces to the extent that it does not reflect that turning point the increase in the energy cost of petroleum extraction is in stark contrast to the changes in the energy cost of producing other goods and services in the u s economy which generally declined in the last 20 years the increase in the energy cost of extraction has important economic implications from 1954 to 1987 the fraction of total industrial output in the u s generated in the petroleum extraction sector declined almost 40 despite the declining share of its output the petroleum industry s share of direct energy use fossil fuels and electricity generally increased in that period the result is a clear increase in the amount of energy diverted from other potential uses to secure an additional unit of output in the petroleum sector none of the indicators reflect to any degree substantial nonmarketed environmental cost of petroleum extraction the biophysical perspective however emphasizes the coupling between physical scarcity and the demands that extraction places on renewable resources and ecosystem services the extraction of one barrel of oil equivalent for example requires 250 gallons of fresh water and emits more than 60 pounds of co2 and these costs are increasing

oil exploration under climate treaties abstract in this paper we focus on how an international climate treaty will influence the exploration of oil in non opec countries we present a numerical intertemporal global equilibrium model for the fossil fuel markets the international oil market is modelled with a cartel opec and a competitive fringe on the supply side following a nash cournot approach an initial resource base for oil is given in the non opec region however the resource base changes over time due to depletion exploration and discovery when studying the effects of different climate treaties on oil exploration two contrasting incentives apply if an international carbon tax is introduced the producer price of oil will drop compared to the reference case this gives an incentive to reduce oil production and exploration however the oil price may increase less rapidly over time which gives an incentive to expedite production and exploration in fact in the case of a rising carbon tax we find the last incentive to be the strongest which means that an international climate treaty may increase oil exploration in non opec countries for the coming decades and reduce opec s market share

economic indicators of resource scarcity a critical essay abstract the theoretical arguments of the conceptual and empirical literature on economic indicators of long run resource scarcity are logically flawed if resource allocators were informed of the nature of resource scarcity their behavior and the economic indicators it generates would reflect the scarcity but if they were so informed we could simply ask them if resources were scarce if they are not informed their behavior and economic indicators are as likely to indicate their ignorance as the reality unfortunately there is no way of knowing whether they are informed or not unless we already know whether resources are scarce

investment with uncertain tax policy does random tax policy discourage investment we consider the impact of tax policy uncertainty on firm level and aggregate investment comparing investment behaviour when uncertainty is due to a shock following geometric brownian motion gbm versus when random discrete jumps in tax policy occur expectations of the likelihood of a tax policy switch have an important negative impact on the gain to delaying investment in the latter model and time to investment can fall with increasing tax policy uncertainty aggregate investment simulations indicate that capital formation is adversely affected by increases in uncertainty in the traditional gbm model but can be enhanced in the jump process model

logit estimates of strike incidence from canadian contract data logit estimates of strike incidence are made based on a unique and comprehensive data set of 2 437 collective agreements the appropriate level of aggregation since that is where bargaining occurs the results are interpreted through a theoretical framework emphasizing that strikes are more likely when the joint costs of using the strike mechanism are low relative to the cost of alternative mechanisms for achieving the same purposes such functions of strikes are to generate information elicit truth telling establish reputations provide catharsis and solve intraorganizational conflict

environmental compliance and energy exploration and production application to offshore oil and gas an integrated investment production regulatory model is developed to examine the economic consequences of proposed environmental regulations on firms in the offshore oil and gas industry ocs related environmental regulatory issues the general modeling approach and selected simulation results are discussed the results show that the impacts of these regulations on ocs firms can be significant in terms of the reduction in after tax net present value the distribution of economic rent and minimum field size results also indicate that at the firm level the influences of different sets of regulatory proposals vary significantly with more stringent regulations having bigger effects

exploration and scarcity noting that a suggested measure of natural resource scarcity resource rent is unobservable we show that rent is linked to observable marginal exploration cost a two period model of extraction and exploration reveals that rent is equal to this cost when discovery is certain under risky exploration cost data can be used to bound rent the model also indicates how exploration uncertainty affects the competitive firm s extraction and exploration decisions finally the behavior of u s oil and gas exploration costs suggests that these costs were rising in the postwar era which has different implications for scarcity than indicated by other measures of scarcity

how do oil producers respond to giant oil field discoveries abstract the classical hotelling model predicts that the optimal extraction level rises immediately after an unexpected resource discovery whereas in reality there are substantial adjustment costs in petroleum production and an average lag of several years between a discovery and the start of production using a large panel of country level production data and a difference in differences identification approach i show that domestic production levels respond before a newly found oil field comes on line and that this increase is driven by non opec producers consistent with different responses of opec and non opec drilling activity offshore fields and exceptionally large super or mega giant fields are also more likely to raise country level production given that domestic petroleum consumption rises by less in response to a discovery at least part of the increase in production seems to go into net oil exports

risk averse mitigation decisions in an unpredictable climate system risk aversion plays a central role in the decisions made in the face of uncertainties and climate change mitigation should be no exception however the interlinkage of risk aversion and climate change uncertainties has hardly been investigated numerically in part because of the computational difficulties of stochastic optimization in this paper we apply the numerical techniques of stochastic optimization to the economic modeling of climate change with the aim of modeling the decision preferences of a risk conscious agent in the face of unpredictable climate change the model underlines the critical role played by the risk aversion parameter in determining the effects of uncertainties on mitigation not only in level but also in sign

the optimal depletion and exploration of a nonrenewable resource in spite of its importance the exploration process has not received much attention in the economics of nonrenewable resources among the researchers who investigated this problem we might mention arrow and chang 1982 deshmukh and pliska 1980 pindyck 1978 1980 and gilbert 1979 1981 for earlier work on this subject we might also mention gaffney 1967 and herfindahl 1974 basically an exploration program is a search for potential deposits whose sizes and locations are both uncertain furthermore exploration technology exhibits a high degree of scale economies our paper represents an attempt to deal with these rather neglected aspects of the exploration process in a model of simultaneous extraction and exploration

a model and empirical estimates of worker pension coverage in the u s an important issue in labor market policy today is private pension coverage it is well known that pension benefits have grown rapidly in the post world war ii years for example pension and other benefit payments as a percentage of total employee compensation rose from 7 4 in 1953 to 13 0 by 1973 11 27 yet pension participation is far from universal the most recent estimate is that 48 of all wage and salary workers currently are covered partly in response to this the president s commission on pension policy has recommended in its final report federal legislation to establish a national minimum funded pension system which would be required of all employers 8 7 this paper attempts to explain the variation in pension coverage two opposing views of pensions having very different implications for pension policy can be identified the first is implicitly adopted by the president s commission in this view pensions are exogenous to the competitive forces of the labor market distributed on a random basis as a bonus pensions do not substitute for other forms of compensation and therefore everyone would prefer to be covered a very different theory is that pensions result from competitive forces implicit in the labor market is a market for pensions in which the supply is the outcome of firms attempting to minimize costs while demand results from workers maximizing utility by choosing the optimal package of wage and nonwage compensation an outcome of this implicit market is a trade off between pension benefits and other forms of compensation if pensions are purchased in this manner systematic differences in pension coverage should emerge some workers will prefer wages and

the seven sisters versus opec solving the mystery of the petroleum market structure abstract this paper provides an explanation of the changing behavior of the crude oil market and tests it using the u s data from january 1913 to september 2014 we claim that the crude oil market has experienced two important structural breaks in its industrial organization the first occurred when venezuela and the arab crude oil exporting countries forced the so called seven sisters to sign the fifty fifty profit sharing agreements the second occurred after opec succeeded in cracking the secrets of the international crude oil marketing and in undertaking the wave of nationalizations of the 1970s

exploration and development of u s oil and gas fields 1955 2002 we study the exploration and development of oil and gas fields in the u s over the period 1955 2002 we make four contributions to explain the economic evolution of the oil and gas industry during this period first we derive a testable model of the dynamics of competitive oil and gas field exploration and development second we show how to empirically distinguish hotelling scarcity effects from effects due to technological change third we test these hypotheses using statewide panel data of exploration and development drilling we find that the time paths of exploration development and total wells drilled are dominated by hotelling scarcity effects finally we offer an explanation for why fixed costs from exploration can make the contracting equilibrium in the mineral rights market efficient

taxes and stimuli of investment under uncertainty this article considers the effect on an irreversible investment of a subsidy to investment in combination with a taxation of future profits it is shown that such a combination raising a zero expected revenue decreases the trigger value of investment the tax rate for which the stimulus works at zero expected cost decreases as heterogeneity in the group of investors increases the importance of the result is exemplified by the graduate tax

exploration for petroleum and the inventory of proven reserves abstract this paper addresses the following question does the number of proven petroleum reserves on the norwegian continental shelf justify the current level of exploratory effort the paper argues that this effort should be curtailed for some time to come it also provides a framework within which the recurrent problem of selecting an appropriate level of exploratory effort can be analysed

on monopoly power in extractive resource markets abstract potential monopoly power in extractive resource markets is reduced by the depletability of reserves this paper examines the dependence of monopoly power on resource rent and on uncertainty over future reserve levels a model is developed that treats reserves as inventories that fluctuate stochastically over time as a result of exploration development and production activities solutions of the model illustrate how output and monopoly power vary with the elasticity of demand rent as a fraction of price and the variance of reserve fluctuations it is shown that uncertainty over future reserves can speed up production and by reducing resource rent restore part of the monopoly power otherwise lost because of depletion antitrust implications are discussed with reference to several resources

a martingale characterization of the price of a nonrenewable resource with decisions involving uncertainty abstract this paper presents a general model of nonrenewable resource consumption and exploration decisions involving uncertainty about the time of occurrence of an event such as exhaustion stock discovery or a substitute development the resulting price process is characterized in terms of necessary and sufficient conditions under which the price is expected to rise at a rate equal to greater than or less than the discount rate the general model is illustrated and the price process and the optimal decisions are characterized by examining the three types of uncertainty indicated above

the effect of unionism on fringe benefits this study analyzes the impact of unionism on fringes paid to production workers using data on individual establishments it compares fringe expenditures in establishments having the same level of compensation per hour and finds that unionism raises the share of compensation allotted to fringes particularly to pensions vacation pay and life accident and health insurance in addition since unionism also raises the straight time wage rate itself a prime determinant of expenditures on fringes unionism has a very sizeable impact on total fringe expenditures as well as on the fringe share of compensation the union fringe effect exceeds in percentage terms the union wage effect and is sufficiently large to suggest that standard union wage studies understate the union effect on total compensation the study also compares the fringe expenditures of production and non production workers within the same establishment controlling for within establishment pay policies the findings suggest that the pres

education as an option to the student education provides many benefits in part education produces human capital by attending school and training on the job the student acquires marketable skills thereby sacrificing current labor income while augmenting future labor income among economists this concept is familiar beginning with the seminal work by mincer 1958 and becker 1964 models of the accumulation of human capital have been extended to the life cycle and more recently to uncertainty simultaneously several of these models have been tested empirically 2 to economists education also serves as a signal by completing a demanding educational program the student signals to prospective employers that he possesses greater innate productivity than other potential employees not completing similar programs this potentially greater productivity the employer then rewards with more favorable conditions of employment

technological renewal of natural resource stocks abstract this paper presents a macroeconomic model of optimal growth with stocks of an exhaustible resource these stocks can be renewed by technological processes which imply some specific investment costs the dates levels and the order of the processes are endogeneous decisions the main results are 1 the present value of the exhaustible resource follows a step function in time falling whenever a new stock becomes available and related to the physical return of the process and 2 shadow prices allow to decentralize the allocation of resources to stock renewal but they do not permit to decentralize the choice of optimal timing this would justify the existence of a coordinating agency

appropriation of common access natural resources through exploration the relevance of the open loop concept in this paper the open loop equilibrium is rehabilitated as a sensible concept for analyzing common property situations in a model of natur al resource exploration in which the sole motivation to explore prior to extraction arises from a strategic incentive to preempt competito rs a consistency rule to the exploration game is applied under which the commonality of reserves is preserved even if strategies are open loop under this rule the so often claimed efficiency of the common property open loop equilibrium is lost copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

optimal exploration for and exploitation of heterogeneous mineral deposits abstract we model exploration for and production from a multiple deposit nonrenewable resource exploration is viewed as a bayesian process involving learning about undiscovered reserves and is undertaken both to improve the quality of and to replenish known reserves known reserves are not physically defined but depend on the realizations of discrete episodes of exploration elsewhere and on decisions at each instant about the margin between ore to be mined and low grade material to be rejected the appropriate measure of resource scarcity the sustainable level of the contribution of the resource and the treatment of depletion in the national accounts are considered

optimal pricing use and exploration of uncertain natural resource stocks abstract units of natural resources to be called mines are assumed distributed over an unexplored territory according to a poisson process in space at any moment total reserves and unexplored land are given society can determine the rate of consumption and the rate of exploration reserves are drawn down by consumption and increased by discoveries made during exploration the amount of unexplored land is decreased by exploration at any moment the payoff of society is a concave function of consumption less a linear function of exploration with future payoffs discounted optimal policies are considered and in particular it is shown for a large amount of unexplored land the shadow prices of reserves and of unexplored land move in random cycles but show only a slight upward tread thereby casting some light on the failure of mineral prices to rise at the market rate of interest

the economics of exploration for non renewable resources abstract the literature on exploration for non renewable resources is surveyed following a brief synopsis in section 2 section 3 focuses on issues related to the world market for resources section 4 considers more microeconomic supply related issues linked to the exploration of the small region or play section 5 turns to the small but growing literature on exploration as a learning process related to r d the latter sections pay particular attention to empirical and policy aspects

double externalities market structure and performance an empirical study of chinese unrenewable resource industries externality is always hard to evaluate and definition but the sustainable development of resource based industries is restrained by it particular externalities of unrenewable resources can be divided into intergenerational and environmental negative externalities in this paper double externalities are respectively estimated by the users cost method and contingent valuation method with chinese data separately then scp structure conduct performance model were built by added double externalities into the structure conduct performance econometric models based on panel data the results showed that the administrative mergers and reorganization which were prompted by the government only increased the scale but not getting efficiency large state owned enterprises produced more externalities as well as less profits development of china s economy had still mainly based on resource depletion rapidly and been paying a big price of environmental externalities

non renewable resources in the long run we model a competitive economy in which production is dependent on labor and a non renewable resource the stock of which is inhomogeneous we solve the model analytically and show how in infinite time the economy moves away from an initial balanced growth path b g p and towards a mature b g p the characteristics of the initial b g p match historical observations of slowly declining resource price and consumption growth tracking global product the mature b g p depends on the nature of the stock the more steeply cross sectional area declines with depth the faster the rate of price increase we show how the theoretical model may be adapted and parameterized to explain and predict the evolution of markets for specific resources applying the model in two cases copper and petroleum c 2016 elsevier b v all rights reserved

information and exhaustible resources a bayesian analysis abstract we develop a continuous time bayesian model of investment in information about an exhaustible resource because of the way that information affects expectations the deterministic hotelling rule turns out to be more appropriate as a description of how resource owners forecast the value of their stocks than as a predictor of observed changes in the resource price a flow of information generates both unanticipated changes in expectations which cause the mean rate of change in the resource price to deviate systematically from the deterministic hotelling rule and reductions in uncertainty which do not affect the hotelling prediction

the role of investment in multiple deposit extraction some results and remaining puzzles abstract papers by olsen and by cairns and lasserre analyze equilibrium in a resource industry where deposit quality varies and where extraction requires capital investment the papers substantially qualify the conventional understanding of such matters as the form of hotelling s rule the role of deposit size the simultaneous extraction from deposits of different quality and the price path the argumentation however a intricate and the crucial role of investment as such a not easily distinguishable we clarify the intuition behind the results bring out the role of the various assumptions and raise important remaining issues

joint production of substitutable exhaustible resources or is flaring gas rational this paper studies the optimal extraction of finite resources which are substitutes and the joint output from a monopolist s production facilities the investigation is motivated by the real world example of the production of oil and associated gas additionally the analysis extends the commonly applied paradigm of perfect substitutes for oil and compares it with the more general description of imperfect substitutes thereby it is shown that wasting one of the finite resources e g flaring natural gas could be optimal to support the revenues from the other commodity furthermore the traditional declining sale policies need not hold over the entire planning horizon because it is optimal at least for some time to increase the sales of the byproduct this result has important consequences on the world energy markets since it suggests that pegging the price of natural gas to the price for crude oil is suboptimal and hence most likely subject to downward revisions

much ado about hotelling beware the ides of hubbert abstract much economic literature analyzes the hotelling principal little economic literature analyzes the hubbert curve although much controversy surrounds it this difference in emphasis by economists needs to be reconsidered critically and towards that end we attempt to look at both concepts simultaneously we test whether a simple hubbert curve model is a significant determinant of world oil price changes and whether one of the main determinants of the hotelling principle the discount rate also affects world oil prices an autoregressive distributed lag ardl bound testing approach is used to examine the effects of a hubbert index variable and a hotelling discount rate variable on the world wide price of oil results show the discount rate the most important hotelling variable has little effect on oil prices but that the hubbert curve model does show a large effect on oil prices oil is a non renewable natural resource par excellence yet the results suggest that the hotelling principle is not an important determinant for oil prices yet the hubbert curve and the theory surrounding the hubbert curve is an important determinant of oil prices