Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/105148
Authors: 
Daubanes, Julien
Lasserre, Pierre
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 5060
Abstract: 
There exists no formal treatment of non-renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location not only depends on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own-price effect, cross-price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: a price increase at some point in space and time causes NRR supply to decrease at all other points. This new but orthodox supply setting extends to NRRs the partial equilibrium analysis of demand and supply policies. The properties of restricted and unrestricted supply functions are characterized for Hotelling (homogenous) as well as Ricardian (non homogenous) reserves, for a single deposit as well as for several deposits that endogenously come into production or cease to be active.
Subjects: 
allocating inventories
allocating reserves
supply theory
price effect
substitution effect
stock compensation effect
green paradox
spatial leakage
JEL: 
Q38
D21
H22
Document Type: 
Working Paper

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