Nonconvexity, efficiency and equilibrium in exhaustible resource depletion

Anthony C. Fisher and Larry Karp

No 6118, CUDARE Working Papers from University of California, Berkeley, Department of Agricultural and Resource Economics

Abstract: We reconsider the problem of inefficiency and nonexistence of a competitive equilibrium in exhaustible resource markets where extraction costs are nonconvex. The existence of a backstop technology (which induces a flat portion of the industry demand curve) restores both existence and efficiency, provided that the backstop price is sufficiently low. If firms face even a small amount of uncertainty regarding their rivals' stocks, a backstop technology is sufficient to restore existence of competitive equilibrium, even if the backstop price is very high. In this case, however, the competitive equilibrium is not efficient.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Pages: 16
Date: 1991
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Related works:
Journal Article: Nonconvexity, efficiency and equilibrium in exhaustible resource depletion (1993)
Working Paper: Nonconvexity, Efficiency and Equilibrium in Exhaustible Resource Depletion (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ucbecw:6118

DOI: 10.22004/ag.econ.6118

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