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Extraction of an Exhaustible Resource: The Effects on Investment of Several Parameters Being Subject to Uncertainty*
Author(s) -
FRASER R. W.,
NOORDEN R. J. VAN
Publication year - 1983
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1983.tb00826.x
Subject(s) - economics , investment (military) , resource (disambiguation) , econometrics , microeconomics , affect (linguistics) , computer science , computer network , linguistics , philosophy , politics , political science , law
This article shows that the effect on investment of the introduction of uncertainty about the size of one parameter depends on what other parameters are simultaneously uncertain. Further, two parameters may be linked with positive or negative covariances. The covariances are here shown to have important effects on the investor, whether risk neutral or risk averse. Governments are advked to consider policies that affect the covariances of those parameters that are key influences on in vestment.