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Monopoly Extraction of an Exhaustible Resource with Two Markets

Carolyn Fischer and Ramanan Laxminarayan (ramanan@rff.org)

RFF Working Paper Series from Resources for the Future

Abstract: Although much has been written about the implications of monopoly power for the rate of extraction of natural resources, the specific case in which the resource can be sold in two markets with different elasticities of demand has escaped notice. We find that a monopolist facing two markets with differing iso-elastic demand schedules extracts more rapidly than the social planner, whether or not arbitrage prevents price discrimination between markets. This analysis is relevant in the case of many resources — such as natural gas used for power generation and household heating, or petroleum used for making plastics and as fuel.

Keywords: exhaustible resources; monopoly; markets; price discrimination (search for similar items in EconPapers)
JEL-codes: D42 Q3 (search for similar items in EconPapers)
Date: 2004-01-31
New Economics Papers: this item is included in nep-ene, nep-env and nep-mic
References: Add references at CitEc
Citations: View citations in EconPapers (13)

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Journal Article: Monopoly extraction of an exhaustible resource with two markets (2004) Downloads
Journal Article: Monopoly extraction of an exhaustible resource with two markets (2004) Downloads
Working Paper: Monopoly Extraction of an Exhaustible Resource with Two Markets (2004) Downloads
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