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Higher Quality Exhaustible Resource Deposits Receiving Higher Or Lower Resource Rents In A Simple Spatial Framework

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  • John Hartwick

Abstract

Kolstad's (1994) model of intertemporal, competitive supply to a linear market from two distinct exhaustible resource deposits admits two different interior solutions - one with the low cost deposit "earning" the higher resource rent and the other with the low cost deposit "earning" the lower resource rent. This latter outcome turns on the initial size of the low cost deposit being significantly larger than the high cost deposit. We infer then that size can trump quality in the determination of the resource rent for a deposit, when geography is explicit.

Suggested Citation

  • John Hartwick, 2012. "Higher Quality Exhaustible Resource Deposits Receiving Higher Or Lower Resource Rents In A Simple Spatial Framework," Working Paper 1306, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:1306
    as

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    File URL: https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1306.pdf
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    References listed on IDEAS

    as
    1. William D. Nordhaus, 1973. "The Allocation of Energy Resources," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 529-576.
    2. Harold Hotelling, 1931. "The Economics of Exhaustible Resources," Journal of Political Economy, University of Chicago Press, vol. 39(2), pages 137-137.
    3. Kolstad Charles D., 1994. "Hotelling Rents in Hotelling Space: Product Differentiation in Exhaustible Resource Markets," Journal of Environmental Economics and Management, Elsevier, vol. 26(2), pages 163-180, March.
    4. Robert D. Cairns & Graham A. Davis, 2001. "Adelman's Rule and the Petroleum Firm," The Energy Journal, , vol. 22(3), pages 31-54, July.
    5. Gerard Gaudet & Michel Moreaux & Stephen W. Salant, 2001. "Intertemporal Depletion of Resource Sites by Spatially Distributed Users," American Economic Review, American Economic Association, vol. 91(4), pages 1149-1159, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    exhaustible resource extraction; deposit quality; linear market;
    All these keywords.

    JEL classification:

    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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