Confuser Cost

Sittidaj Pongkijvorasin and James Roumasset
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Sittidaj Pongkijvorasin: Department of Economics, University of Hawaii at Manoa; Chulalongkorn University, Bangkok, Thailand

No 200712, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: The terms “royalty”, “marginal user cost”, and “scarcity rent” are often used interchangeably in resource economics, resulting in considerable confusion. We suggest distinct and meaningful definitions for the terms “royalty”, “marginal user cost”, and “scarcity rent” and discuss the relationships among them. Using the example of extraction fees for leasees, we show how failing to understand the distinct meaning of these terms may lead to policy errors. By constructing a model containing both capital and resources as state variables, we verify that user cost in capital theory is a different concept than marginal user cost in resource economics and suggest a taxonomy to avoid misinterpretation.

Keywords: renewable resources; marginal user cost; royalty; scarcity rent; shadow price; Hotelling rent; user cost of capital (search for similar items in EconPapers)
JEL-codes: A10 D24 E22 Q20 Q28 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2007-06-12
New Economics Papers: this item is included in nep-env, nep-gth and nep-soc
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