SET‐UP COSTS AND THE THEORY OF EXHAUSTIBLE RESOURCES

John M. Hartwick, Murray Kemp and Ngo Long

Papers in Regional Science, 1985, vol. 56, issue 1, 99-111

Abstract: ABSTRACT Let there be several identical deposits of an exhaustible, non‐renewable resource, the working of each deposit entailing a set‐up cost but no other costs. It is found that the optimal path of extraction dictates that the deposits must be removed in strict sequence with discontinuities of marginal benefit at transition points. Moreover, the average rate of increase of marginal benefit is less than the rate of interest. These results embellish Hotelling's rule relating to optimal methods of resource extraction.

Date: 1985
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https://doi.org/10.1111/j.1435-5597.1985.tb00841.x

Related works:
Journal Article: Set-up costs and theory of exhaustible resources (1986)
Working Paper: Set-up Costs and Theory of Exhaustible Resources (1980)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:presci:v:56:y:1985:i:1:p:99-111

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