IDEAS home Printed from https://ideas.repec.org/a/bla/germec/v10y2009i4p401-421.html
   My bibliography  Save this article

Extracting Resource Deposits of Unknown Size: Optimal Order

Author

Listed:
  • Murray C. Kemp
  • Ngo Van Long

Abstract

. The optimal order of extracting resource deposits of unknown size depends on the informational characteristics of the extraction process. This paper fills the gap between two strands of literature. The first strand is about the optimal extraction of single reserve under stock‐size uncertainty. The second strand is about the optimal order of extraction of deposits of known sizes. Our emphasis on the premium for resolution of uncertainty complements Solow and Wan's shadow surcharge when extraction moves from a low‐cost deposit to a high‐cost one.

Suggested Citation

  • Murray C. Kemp & Ngo Van Long, 2009. "Extracting Resource Deposits of Unknown Size: Optimal Order," German Economic Review, Verein für Socialpolitik, vol. 10(4), pages 401-421, November.
    • Handle: RePEc:bla:germec:v:10:y:2009:i:4:p:401-421
    DOI: 10.1111/j.1468-0475.2009.00488.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-0475.2009.00488.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1468-0475.2009.00488.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kumar, Ramesh C., 2005. "How to eat a cake of unknown size: A reconsideration," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 408-421, September.
    2. Hartwick, John M, 1978. "Exploitation of Many Deposits of an Exhaustible Resource," Econometrica, Econometric Society, vol. 46(1), pages 201-217, January.
    3. Robson, Arthur J., 1979. "Sequential exploitation of uncertain deposits of a depletable natural resource," Journal of Economic Theory, Elsevier, vol. 21(1), pages 88-110, August.
    4. Sanford J. Grossman & Richard E. Kihlstrom & Leonard J. Mirman, 1977. "A Bayesian Approach to the Production of Information and Learning By Doing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 533-547.
    5. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    6. Amigues, Jean-Pierre & Favard, Pascal & Gaudet, Gerard & Moreaux, Michel, 1998. "On the Optimal Order of Natural Resource Use When the Capacity of the Inexhaustible Substitute Is Limited," Journal of Economic Theory, Elsevier, vol. 80(1), pages 153-170, May.
    7. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    8. Glenn C. Loury, 1978. "The Optimal Exploitation of an Unknown Reserve," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 45(3), pages 621-636.
    9. Monica Brezzi & Tze Leung Lai, 2000. "Incomplete Learning from Endogenous Data in Dynamic Allocation," Econometrica, Econometric Society, vol. 68(6), pages 1511-1516, November.
    10. Robert M. Solow & Frederic Y. Wan, 1976. "Extraction Costs in the Theory of Exhaustible Resources," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 359-370, Autumn.
    11. Long, Ngo Van, 1975. "Resource extraction under the uncertainty about possible nationalization," Journal of Economic Theory, Elsevier, vol. 10(1), pages 42-53, February.
    12. Kihlstrom, Richard E, 1974. "A Bayesian Model of Demand for Information About Product Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 15(1), pages 99-118, February.
    13. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    14. Wirl, Franz, 1988. "Resource extraction of imperfect substitutes," Energy Economics, Elsevier, vol. 10(3), pages 242-248, July.
    15. Murray C. Kemp & Ngo Van Long, 2007. "Extracting Several Resource Deposits of Unknown Size: Optimal Order," CIRANO Working Papers 2007s-10, CIRANO.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang, Shubo & Jahanger, Atif & Balsalobre-Lorente, Daniel, 2024. "Sustainable resource management in China's energy mining sector: A synthesis of development and conservation in the FinTech era," Resources Policy, Elsevier, vol. 89(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:bla:germec:v:10:y:2009:i::p:401-421 is not listed on IDEAS
    2. Murray C. Kemp & Ngo Van Long, 2007. "Extracting Several Resource Deposits of Unknown Size: Optimal Order," CIRANO Working Papers 2007s-10, CIRANO.
    3. van der Ploeg, Frederick, 2010. "Aggressive oil extraction and precautionary saving: Coping with volatility," Journal of Public Economics, Elsevier, vol. 94(5-6), pages 421-433, June.
    4. Gérard Gaudet, 2007. "Natural resource economics under the rule of Hotelling," Canadian Journal of Economics, Canadian Economics Association, vol. 40(4), pages 1033-1059, November.
    5. Devarajan, Shantayanan & Fisher, Anthony C, 1981. "Hotelling's "Economics of Exhaustible Resources": Fifty Years Later," Journal of Economic Literature, American Economic Association, vol. 19(1), pages 65-73, March.
    6. Vicknair, David & Tansey, Michael & O'Brien, Thomas E., 2022. "Measuring fossil fuel reserves: A simulation and review of the U.S. Securities and Exchange Commission approach," Resources Policy, Elsevier, vol. 79(C).
    7. Sweeney, James L., 1993. "Economic theory of depletable resources: An introduction," Handbook of Natural Resource and Energy Economics, in: A. V. Kneese† & J. L. Sweeney (ed.), Handbook of Natural Resource and Energy Economics, edition 1, volume 3, chapter 17, pages 759-854, Elsevier.
    8. Julien Daubanes & Pierre Lasserre, 2019. "The supply of non-renewable resources," Canadian Journal of Economics, Canadian Economics Association, vol. 52(3), pages 1084-1111, August.
    9. Andrade de Sá, Saraly & Daubanes, Julien, 2016. "Limit pricing and the (in)effectiveness of the carbon tax," Journal of Public Economics, Elsevier, vol. 139(C), pages 28-39.
    10. Fabre, Adrien & Fodha, Mouez & Ricci, Francesco, 2020. "Mineral resources for renewable energy: Optimal timing of energy production," Resource and Energy Economics, Elsevier, vol. 59(C).
    11. Amigues, Jean-Pierre & Kama, Alain Ayong Le & Moreaux, Michel, 2015. "Equilibrium transitions from non-renewable energy to renewable energy under capacity constraints," Journal of Economic Dynamics and Control, Elsevier, vol. 55(C), pages 89-112.
    12. Gérard Gaudet & Pierre Lasserre, 2011. "The Efficient Use Of Multiple Sources Of A Nonrenewable Resource Under Supply Cost Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 245-258, February.
    13. Robinson, James A. & Srinivasan, T.N., 1993. "Long-term consequences of population growth: Technological change, natural resources, and the environment," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 21, pages 1175-1298, Elsevier.
    14. Ulibarri, Carlos A., 1996. "Non-conventional fuel tax credits and the extraction R&D model," Resources Policy, Elsevier, vol. 22(3), pages 207-215, September.
    15. Kheiravar, Khaled H, 2019. "Economic and Econometric Analyses of the World Petroleum Industry, Energy Subsidies, and Air Pollution," Institute of Transportation Studies, Working Paper Series qt3gj151w9, Institute of Transportation Studies, UC Davis.
    16. 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.
    17. Bazhanov, Andrei, 2008. "Maximin-optimal sustainable growth with nonrenewable resource and externalities," MPRA Paper 9510, University Library of Munich, Germany, revised 02 Jul 2008.
    18. Reynolds, Douglas B., 2013. "Uncertainty in exhaustible natural resource economics: The irreversible sunk costs of Hotelling," Resources Policy, Elsevier, vol. 38(4), pages 532-541.
    19. Salant, Stephen W., 2016. "What ails the European Union׳s emissions trading system?," Journal of Environmental Economics and Management, Elsevier, vol. 80(C), pages 6-19.
    20. Sudhakar D. Deshmukh & Stanley R. Pliska, 1981. "Optimal Consumption of A Nonrenewable Resource with Stochastic Discoveries and a Random Environment," Discussion Papers 500, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    21. R. Quentin Grafton & Tom Kompas & Ngo Van Long, 2010. "Biofuels Subsidies and the Green Paradox," CESifo Working Paper Series 2960, CESifo.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:germec:v:10:y:2009:i:4:p:401-421. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/vfsocea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.