Extraction of non-renewable resources: a differential game approach

George Halkos and George Papageorgiou

MPRA Paper from University Library of Munich, Germany

Abstract: Exploitation of non–renewable resources is an intensively studied field of environmental economics in the last century. Since the influential Hotelling’s paper a huge progress is made in the depletable resources literature. Although a variety of methodologies is used in that problem’s solutions a basic question of time inconsistency arises in the solution process. We show the sources of dynamical time inconsistency in a leader – follower game for which the buyer leads while the extractor follows and the players employ open loop strategies. Also we make use of Markovian informational structure, in a non – renewable resource Nash game, in order to extract strategies that are time consistent. Finally we enlarge the utility function space from the logarithmic utility to the utility functions that exhibits relative risk aversion with the same, with respect to time consistency, strategies.

Keywords: Non-renewable resources; time consistency; Markovian strategies; leader-follower (search for similar items in EconPapers)
JEL-codes: C60 C61 C62 C70 C72 Q00 Q30 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (5)

Published in Archieves of Economic History XXI.1(2008): pp. 5-22

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