Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/171646
Authors: 
Bommier, Antoine
Bretschger, Lucas
Le Grand, François
Year of Publication: 
2014
Series/Report no.: 
Economics Working Paper Series 14/203
Abstract: 
The paper proves the existence of equilibrium in nonrenewable resource markets when extraction costs are non-convex and resource storage is possible. Inventories flatten the consumption path and eliminate price jumps at the end of the extraction period. Market equilibrium becomes then possible, contradicting previous claims from Eswaran, Lewis and Heaps (1983). We distinguish between two types of solutions, one with immediate and one with delayed build-up of inventories. For both cases we do not only characterize potential optimal paths but also show that equilibria actually exist under fairly general conditions. It is found that optimum resource extraction involves increasing quantities over a period of time. What is generally interpreted as an indicator of increasing resource abundance is thus perfectly compatible with constant resource stocks.
Subjects: 
Exhaustible resources
nonconvex extraction cost
equilibrium existence
resource storage
JEL: 
Q30
C62
D92
D41
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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