Is Recycling a Threat or an Opportunity for the Extractor of an Exhaustible Resource?

Bocar Samba Ba and Philippe Mahenc
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Bocar Samba Ba: LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UPVM - Université Paul-Valéry - Montpellier 3 - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier, CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique

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Abstract: We examine the best extraction strategies for the provider of an exhaustible resource that can be recycled. In a two-period model of resource extraction, the extractor faces prospective entry by a recycler that incurs a fixed cost to produce a perfect substitute of the virgin resource. Its entry is an opportunity or a threat for the extractor, depending on whether it maximizes social welfare or its own revenue. Our results highlight how prospective recycling modifies the Hotelling rule. We characterize various entry possibilities. The benevolent extractor may accommodate or promote recycling, while the self-interested extractor may accommodate or deter recycling.

Keywords: Recycling; Ramsey formula; Entry; Exhaustible resource; Hotelling rule (search for similar items in EconPapers)
Date: 2019
Note: View the original document on HAL open archive server: https://hal.science/hal-01905045v1
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Citations: View citations in EconPapers (10)

Published in Environmental and Resource Economics, 2019, 73 (4), pp.1109-1134. ⟨10.1007/s10640-018-0293-1⟩

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Journal Article: Is Recycling a Threat or an Opportunity for the Extractor of an Exhaustible Resource? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01905045

DOI: 10.1007/s10640-018-0293-1

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