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| Author: | Holland, S. P. |
| Title: | Extraction capacity and the optimal order of extraction |
| Journal: | Journal of Environmental Economics and Management
2003 : MAY, VOL. 45:3, p. 569-588 |
| Index terms: | NATURAL RESOURCES COSTS ENVIRONMENT MANAGEMENT |
| Language: | eng |
| Abstract: | The least-cost-first extraction rule for deposits with different extraction costs previously has been shown to be invalid in general equilibrium. This paper demonstrates that this rule also does not hold in partial equilibrium when extraction capacity is limited. Necessary and sufficient conditions for several surprising extraction orders are presented. If extraction from a high-cost resource is constrained, it may be optimal to begin extraction from a high-cost deposit (or backstop) strictly before extracting from a lower-cost deposit. If extraction from a low-cost resource is limited, it may be optimal to exhaust a high-cost deposit strictly before the low-cost deposit is exhausted or to abandon extraction temporarily from a high-cost deposit and then to exhaust it later. |
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