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- Title
Exhaustible Resources, Non-Convexity and Competitive Equilibrium.
- Authors
Cairns, Robert D.
- Abstract
Theoretical underpinnings of competitive equilibrium in an exhaustible-resource market with non-convex (u-shaped) costs are proposed. The analysis extends to intertemporal production Novshek and Sonnenschein’s approximation of static competitive equilibrium by limits of Cournot equilibria. A problem with using Novshek and Sonnenschein’s method is that oligopolistic equilibrium, even an open-loop equilibrium, to which limits might be applied, does not exist when there is a non-convex technology. Using epsilon equilibrium as the equilibrium concept finesses this problem. There are two types of limiting competitive equilibrium. A third type of competitive equilibrium that has been prominent in the literature is found to be inconsistent with limiting approximations.
- Subjects
NONRENEWABLE natural resources; MARKET equilibrium; MARKET pricing; REFERENCE pricing; MARKETING strategy; COMPETITIVE advantage in business; MARKET potential; PRODUCTION (Economic theory); MICROECONOMICS
- Publication
Environmental & Resource Economics, 2008, Vol 40, Issue 2, p177
- ISSN
0924-6460
- Publication type
Article
- DOI
10.1007/s10640-007-9147-y