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Is Recycling a Threat or an Opportunity for the Extractor of an Exhaustible Resource?

  • Bocar Samba Ba
  • Philippe MahencEmail author
Article
  • 60 Downloads

Abstract

We examine the best extraction strategies for the provider of an exhaustible resource that can be recycled. In a two-period model of resource extraction, the extractor faces prospective entry by a recycler that incurs a fixed cost to produce a perfect substitute of the virgin resource. Its entry is an opportunity or a threat for the extractor, depending on whether it maximizes social welfare or its own revenue. Our results highlight how prospective recycling modifies the Hotelling rule. We characterize various entry possibilities. The benevolent extractor may accommodate or promote recycling, while the self-interested extractor may accommodate or deter recycling.

Keywords

Entry Exhaustible resource Hotelling rule Ramsey formula Recycling 

JEL Classification

D40 L13 Q30 

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Copyright information

© Springer Nature B.V. 2018

Authors and Affiliations

  1. 1.CNRS, CERDIUniversité Clermont AuvergneClermont-FerrandFrance
  2. 2.CNRS, INRA, Montpellier SupAgroCEE-M, Univ MontpellierMontpellierFrance

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