Lecture_16 - Hotelling Model Today's topics Competitive...

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Hotelling Model Today’s topics Competitive industry in a nonrenewable resource …decentralizing the dynamically efficient solution Model extensions Extension 1: Deposits of different quality Extension 2: Backstop resource (backstop technology) Empirical application: Global energy resources
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Recall: Monday’s topics 4-quadrant representation of the model Finding T*, the efficient exhaustion date Comparative static analysis on T* and p 0 … what happens when change c, r, or S 0 ? Competitive industry in a nonrenewable resource …decentralizing the dynamically efficient solution
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Dynamic Efficiency and the Competitive Market Equilibrium Finding: the dynamically efficiency depletion path of a nonrenewable resource is a competitive market equilbirium. Motivation: will owners of the natural resource supply q t * given p t *? Consider: equilibrium in an asset market Arbitrage notion: rate of return in all physical asset markets equals rate of return on all financial instruments
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Competitive Market Equilibrium (cont.) Proof by contradiction
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This note was uploaded on 04/03/2008 for the course ECON 472 taught by Professor Moore during the Winter '08 term at University of Michigan.

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Lecture_16 - Hotelling Model Today's topics Competitive...

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