Adjusting Prices for Volume: a test of the Hotelling valuation principle

Peter Berck

Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: This paper tests the hypothesis that the net of extraction cost price of a natural resource does not change with volume. The hypothesis is shown to he a consequence of Hotelling's theory. The tests are performed on equations estimated by a nonparametric regression (ACE), and we show that the usual least squares estimation techniques are not general enough to successfully perform the test. The test rejects the pure form of the Hotelling theory and shows that it is necessary to adjust sale prices for volume sold.

Keywords: natural resources; prices; regression analysis (search for similar items in EconPapers)
Date: 1988-08-01
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Persistent link: https://EconPapers.repec.org/RePEc:cdl:agrebk:qt4g53g5sz

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