EconPapers    
Economics at your fingertips  
 

The Hotelling Model with Multiple Demands

Gérard Gaudet () and Stephen Salant ()

Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ

Abstract: The purpose of this chapter is to provide an elementary introduction to the nonrenewable resource model with multiple demand curves. The theoretical literature following Hotelling (1931) assumed that all energy needs are satisfied by one type of resource (e.g. "oil"), extractible at different per-unit costs. This formulation implicitly assumes that all users are the same distance from each resource pool, that all users are subject to the same regulations, and that motorist users can switch as easily from liquid fossil fuels to coal as electric utilities can. These assumptions imply, as Herfindahl (1967) showed, that in competitive equilibrium all users will exhaust a lower cost resource completely before beginning to extract a higher cost resource: simultaneous extraction of different grades of oil or of oil and coal should never occur. In trying to apply the single-demand curve model during the last twenty years, several teams of authors have independently found a need to generalize it to account for users differing in their (1) location, (2) regulatory environment, or (3) resource needs. Each research team found that Her ndahl's strong, unrealistic conclusion disappears in the generalized model, in its place, a weaker Herfindahl result emerges. Since each research team focussed on a different application, however, it has not always been clear that everyone has been describing the same generalized model. Our goal is to integrate the findings of these teams and to exposit the generalized model in a form which is easily accessible.

Pages: 21 pages
Date: 2014
New Economics Papers: this item is included in nep-ene, nep-env and nep-ind
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.cireqmontreal.com/wp-content/uploads/cahiers/08-2014-cah.pdf (application/pdf)

Related works:
Working Paper: The hotelling model with multiple demands (2014) Downloads
Working Paper: The Hotelling Model with Multiple Demands (2014) Downloads
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:mtl:montec:08-2014

Access Statistics for this paper

More papers in Cahiers de recherche from Centre interuniversitaire de recherche en économie quantitative, CIREQ Contact information at EDIRC.
Bibliographic data for series maintained by Sharon BREWER ().

 
Page updated 2020-05-06
Handle: RePEc:mtl:montec:08-2014