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THE EFFICIENT USE OF MULTIPLE SOURCES OF A NONRENEWABLE RESOURCE UNDER SUPPLY COST UNCERTAINTY *
Author(s) -
Gaudet Gérard,
Lasserre Pierre
Publication year - 2011
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2010.00627.x
Subject(s) - stockpile , non renewable resource , limiting , resource (disambiguation) , natural resource economics , environmental economics , economics , computer science , renewable energy , engineering , mechanical engineering , computer network , physics , nuclear physics , electrical engineering
Whereas in a deterministic world leaving a high‐cost source of a nonrenewable resource untouched as long as a less costly source is available is always efficient, this may not be the case in a stochastic world. Conditions are derived under which it can be efficient to use a risky supply source in order to conserve a cheaper nonrisky source, or to use a costly nonrisky source while a less costly risky source is still available. A supply embargo can be interpreted as a limiting case; the nonrisky source can be reinterpreted as an artificial stockpile.