Price Formation of Exhaustible Resources: An Experimental Investigation of the Hotelling Rule

Mathias Erlei and Christoph Neumann
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Christoph Neumann: Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal), https://www.wiwi.tu-clausthal.de/abteilungen/volkswirtschaftslehre/

TUC Working Papers in Economics from Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal)

Abstract: In 1931 Harold Hotelling published his seminal contribution to the economic theory of exhaustible resources. His major insight states that the prices of exhaustible resources - more specifically the scarcity rent - will rise at the rate of interest, and consumption will decline over time. The equilibrium implies social optimality. However, empirical analysis shows that market prices of exhaustible resources rarely follow the predicted pattern. Yet our experimental investigation provides support for the position that the Hotelling rule is relevant for the long term development of resource prices.

Keywords: Exhaustible resource; Hotelling rule; Intertemporal Allocation Problem; Continuous Double Auction; Experiment (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014
New Economics Papers: this item is included in nep-ene and nep-exp
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tuc:tucewp:0013

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