Open AccessNONMALLEABLE CAPITAL AND EFFICIENT ALLOCATION OF A NONRENEWABLE RESOURCE
Author(s) -
Rowse John,
Yeung David
Publication year - 1990
Publication title -
natural resource modeling
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.28
H-Index - 32
eISSN - 1939-7445
pISSN - 0890-8575
DOI - 10.1111/j.1939-7445.1990.tb00096.x
Subject(s) - sawtooth wave , economics , capital (architecture) , non renewable resource , capital allocation line , microeconomics , resource (disambiguation) , resource allocation , natural resource economics , monetary economics , market economy , computer science , renewable energy , biology , ecology , profit (economics) , computer network , archaeology , computer vision , history
Using a discrete‐time model with nonmallable and durable capital embodied in a two‐period recovery profile, we determine the efficient allocation of a nonrenewable resource and compare it with the corresponding Hotelling allocation for which capital is malleable. Depending on the recovery profile, efficient prices can rise strictly monotonically over time, rise in a stairwise fashion or rise in a sawtooth fashion around a rising price trend. Except for the sawtooth rise, this price behavior requires faster exhaustion than when capital is malleable, implying that the nonmalleability and durability of capital should not be ignored in nonrenewable resource models.