Increasing Extraction Costs and Resource Prices: Some Further Results

Donald A. Hanson

Bell Journal of Economics, 1980, vol. 11, issue 1, 335-342

Abstract: There has been considerable interest concerning the form of the efficiency price path when extraction costs increase over time. This paper presents a reasonable condition on the distribution of resources among cost grades which implies that the efficiency path is concave, with a relatively high initial price but a declining growth of price, and that the scarcity rent path decreases monotonically. The average scarcity rent path decreases monotonically. The average scarcity rent is also explicitly determined. Finally, a measure of resource scarcity is obtained on the basis of the current efficient competitive price of the resource.

Date: 1980
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