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Monopoly and the Rate of Extraction of Exhaustible Resources: Note

Burness, H. Stuart and Lewis, Tracy R. and Matthews, Steven A. (1976) Monopoly and the Rate of Extraction of Exhaustible Resources: Note. Social Science Working Paper, 137. California Institute of Technology , Pasadena, CA. (Unpublished)

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The contention that a monopolist exhausts a natural resource at a slower than socially optimal rate is examined for two cases: (1) fixed operation costs; and (2) demand elasticity increasing with output. Under either or both of these assumptions, monopoly extraction rates may be biased in the opposite direction towards excessive resource use. On balance, it is concluded, the effect of monopoly ownership on relative extraction rates must be determined empirically. Furthermore we suggest that the addition of fixed costs into the analysis will tend to destroy the Pareto optimal properties of resource extraction under competitive conditions.

Item Type:Report or Paper (Working Paper)
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Additional Information:The authors wish to thank Jim Quirk and Vernon Smith for thoughtful comments and suggestions in preparing this note. Financial assistance from the Ford Foundation and ERDA is gratefully acknowledged. Published as Lewis, Tracy R., Steven A. Matthews, and H. Stuart Burness. "Monopoly and the rate of extraction of exhaustible resources: Note." The American Economic Review 69.1 (1979): 227-230.
Group:Social Science Working Papers
Subject Keywords:Elasticity of demand, Economic resources, Natural resources, Nonrenewable resources, Extraction costs, Operating costs, Fixed costs, Monopoly, Cost efficiency, Economic costs
Series Name:Social Science Working Paper
Issue or Number:137
Record Number:CaltechAUTHORS:20171026-151457292
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82715
Deposited By: Jacquelyn Bussone
Deposited On:27 Oct 2017 17:01
Last Modified:03 Oct 2019 18:57

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