NOTES AND COMMENTS HETEROGENEOUS DEMAND AND ORDER OF RESOURCE EXTRACTION 1. INTRODUCTION

HERFINDAHL (1967) AND SOLOW AND WAN (1976) SHOW that several deposits of an exhaustible resource, identical except for different unit extraction costs, are optimally extracted in order of increasing extraction cost. Kemp and Long (1980) show that this need not be true in a general equilibrium framew...

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Bibliographic Details
Published inEconometrica Vol. 62; no. 6; p. 1445
Main Authors Chakravorty, Ujjayant, KRULCE, DARRELL L
Format Journal Article
LanguageEnglish
Published Evanston Blackwell Publishing Ltd 01.11.1994
Subjects
Coal
Costs
Crude oil prices
Demand curves
Electricity generation
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Summary:HERFINDAHL (1967) AND SOLOW AND WAN (1976) SHOW that several deposits of an exhaustible resource, identical except for different unit extraction costs, are optimally extracted in order of increasing extraction cost. Kemp and Long (1980) show that this need not be true in a general equilibrium framework, if the unit extraction cost of each deposit is constant in terms of a perfect substitute for the resource. Lewis (1982) proves that even in the Kemp-Long framework, least-cost deposits will be extracted first as long as the extracted resource can be converted into capital that can be consumed or stored for future consumption.
ISSN:0012-9682
1468-0262