On the existence and optimality of competitive equilibria in nonrenewable resource industries

If average costs in a nonrenewable resource industry are U-shaped, a competitive equilibrium may not be optimal and, indeed, may not exist. Although the differential equation that describes the change in the rate of extraction is the same for planner and firm, the boundary conditions obtained from the transversality conditions for the respective problems (for planner and firm) will not, in general, be the same. If costs are convex, or if there exists a backstop technology which can produce the resource services at sufficiently low cost, the boundary conditions are, however, the same.


Issue Date:
1989
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/6190
Total Pages:
20
Series Statement:
CUDARE Working Paper
521




 Record created 2017-04-01, last modified 2017-08-23

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