Competition in Markets for Depletable Resources with Setup Costs
- 71 Downloads
This paper analyzes the impact on exhaustible resource markets of setup costs, a sparsely analyzed category of nonconvex production technologies. This paper proves that, even under idealized circumstances for competition, a competitive equilibrium will fail to exist in the presence of setup costs, for any utility and cost functions such that a planner would exploit exhaustible resource pools sequentially.
Keywordscompetitive equilibrium natural resources non-convexities setup costs shutdown costs
Unable to display preview. Download preview PDF.
- Dasgupta, P., Gilbert, R., Stiglitz, J. 1982Invention and Innovation under Alternative Market Structures: The Case of Natural ResourcesReview of Economic Studies49567582Google Scholar
- Eswaran, M., Heaps, T., Lewis, T.R. 1983On the Nonexistence of Market Equilibria in Exhaustible Resource Markets with Decreasing CostsJournal of Political Economy9115467Google Scholar
- Fischer C., Laxminarayan (in press), Sequential Development and Exploitation of an Exhaustible Resource: Do Monopoly Rights Promote Conservation? Journal of Environmental Economics and Management.Google Scholar
- Fisher, A.C., Karp, L.S. 1993Nonconvexity, Efficiency and Equilibrium in Exhaustible Resource DepletionEnvironmental and Resource Economics397106Google Scholar
- Hartwick, J.M., Kemp, M.C., Long, N.V. 1986Set-Up Costs and Theory of Exhaustible ResourcesJournal of Environmental Economics and Management13212224Google Scholar
- Hartwick, J.M. 1989Non-Renewable Resources, Extraction Programs and MarketsHarwood Academic PublishersChur, SwitzerlandGoogle Scholar
- Kimmel, S. 1984A Note on Extraction with Nonconvex CostsJournal of Political Economy9211581167Google Scholar
- Lewis, T.R., Matthews, S.A., Burness, H.S. 1979Monopoly and the Rate of Extraction of Exhaustible Resources: NoteAmerican Economic Review69227230Google Scholar
- Lozada, G.A. 1996Existence of Equilibria in Exhaustible Resource Industries: Nonconvexities and Discrete v. Continuous TimeJournal of Economic Dynamics and Control20433444Google Scholar
- Mumy, G.E. 1984Competitive Equilibria in Exhaustible Resource Markets with Decreasing Costs – Demonstration of Nonexistence – A CommentJournal of Political Economy9211681174Google Scholar
- Stiglitz, J.E. 1976Monopoly and Rate of Extraction of Exhaustible ResourcesAmerican Economic Review66655661Google Scholar