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Extracting Resource Deposits of Unknown Size: Optimal Order

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  • 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.

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  • 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
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    1. 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.
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