Quarterly Journal of Economics Vol. 94 No. 1 1980
Monopoly and the Intertemporal Production of a Durable Extractable Resource
Abstract
In extractive industries producing a resource that does not quickly wear out, monopoly power has an important effect on the rate of production, and hence on the pattern of prices, over time. In many cases, a monopoly producer of a durable resource will rationally choose a high initial price, and lower that price over time; this contrasts dramatically with the strategy of a competitive extractive industry, which optimally increases price over time at the industry's discount rate, regardless of the durability of the resource. In the cases we study, it is found that a monopoly producer of a durable resource will be more conservation-minded than will a competitive industry, initially producing at a slower rate in order to keep early-period prices high.
- DOI
- 10.2307/1884606
- Volume
- 94
- Issue
- 1
- Pages
- 99
- Sources
- openalex crossref