Exploration and Exhaustible Resources: The Microfoundations of Aggregate Models

Joseph E Swierzbinski and Robert Mendelsohn

International Economic Review, 1989, vol. 30, issue 1, 175-86

Abstract: The appropriate specifications for aggregate extraction and exploration cost functions are derived from a disaggregate model of the search for low-cost deposits of an exhaustible resource. The common practice of combining the no-discovery extraction cost function with exploration is shown to result in a misspecified model for which the total cost of extracting the resource is not well defined. The widely accepted prediction that the anticipated discovery of low-cost deposits results in a U-shaped price path appears to be an artifact of this misspecification. For the authors' properly specified cost functions, the predicted resource price always rises. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1989
References: Add references at CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://links.jstor.org/sici?sici=0020-6598%2819890 ... 3B2-%23&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:30:y:1989:i:1:p:175-86

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Harold L. Cole

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and ().