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Social and Behavioral Sciences Commons

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Agricultural and Resource Economics

Selected Works

Charles F Mason

2012

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Full-Text Articles in Social and Behavioral Sciences

On Equilibrium In Resource Markets With Scale Economies And Stochastic Prices, Charles Mason Dec 2011

On Equilibrium In Resource Markets With Scale Economies And Stochastic Prices, Charles Mason

Charles F Mason

In this paper, I show the existence and the characteristics of equilibrium in a non-renewable resource market where extraction costs are non-convex and market price is subject to stochastic shocks, an empirically relevant setting. In my model firms may be motivated to hold inventories to facilitate production smoothing, which allows them to continue producing at a smooth pace at any instant when extraction ceases, e.g. when reserves are exhausted. This aspect of the model then supports a competitive equilibrium in the presence of non-convex costs. Casual empirical evidence is provided that supports the central features of my model for a …