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Interest Rate and Output Price Uncertainty and Industry Equilibrium for Nonrenewable Resource Extracting Firms

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  • Yeung, David
  • Hartwick, John M.

Abstract

We establish convexity of a nonrenewable resource extracting agent's value function in the future interest rate, a random variable. A preference by the agent for future interest rate uncertainty follows. A rational expectations, m identical firm industry equilibrium is characterized and the links between interest rate uncertainty and output price uncertainty are investigated.

Suggested Citation

  • Yeung, David & Hartwick, John M., 1985. "Interest Rate and Output Price Uncertainty and Industry Equilibrium for Nonrenewable Resource Extracting Firms," Queen's Institute for Economic Research Discussion Papers 275200, Queen's University - Department of Economics.
    • Handle: RePEc:ags:queddp:275200
    DOI: 10.22004/ag.econ.275200
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    References listed on IDEAS

    as
    1. Lucas, Robert E, Jr & Prescott, Edward C, 1971. "Investment Under Uncertainty," Econometrica, Econometric Society, vol. 39(5), pages 659-681, September.
    2. Eswaran, Mukesh & Lewis, Tracy R., 1984. "Ultimate recovery of an exhaustible resource under different market structures," Journal of Environmental Economics and Management, Elsevier, vol. 11(1), pages 55-69, March.
    3. Yeung, David & Hartwick, John M., 1988. "Interest rate and output price uncertainty and industry equilibrium for non-renewable resource extracting firms," Resources and Energy, Elsevier, vol. 10(1), pages 1-14, March.
    4. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
    5. Hartwick, John M. & Yeung, David, 1985. "Preference for output price uncertainty by the non-renewable resource extracting firm," Economics Letters, Elsevier, vol. 19(1), pages 85-89.
    6. Brock, William A & Magill, Michael J P, 1979. "Dynamics under Uncertainty," Econometrica, Econometric Society, vol. 47(4), pages 843-868, July.
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    Cited by:

    1. Chen, C. & Li, Y.P. & Huang, G.H., 2016. "Interval-fuzzy municipal-scale energy model for identification of optimal strategies for energy management – A case study of Tianjin, China," Renewable Energy, Elsevier, vol. 86(C), pages 1161-1177.

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