Estimation of Market Power in a Nonrenewable Resource Industry

Ellis, Gregory M.; Halvorsen, Robert

doi:10.1086/340777

Cited by 31 publications

(15 citation statements)

References 15 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Looking at the left hand side schedules the coe¢ cient a 2 obtains its largest value, has the lowest p-value and the residuals are minimized at T = 40. 45 The right hand side schedule shows the observations and the average yearly growth rate when grouping observations of similar remaining years to exhaustion ( 20). By ocular inspection, also this suggests a cuto¤ at T = 40 being reasonable.…”

Section: Remaining Years To Exhaustion and Price Growthmentioning

confidence: 90%

“…To get around these issues some studies have used indirect measures of scarcity. For instance, Halvorsen & Smith (1984, 1991, Chermak & Patrick (2001) and Ellis & Halvorsen (2002). For a further discussion of those empirical results see Hart & Spiro (2011).…”

Section: Introductionmentioning

confidence: 95%

“…However, a numerical analysis suggests that one either needs a very short time horizon or unrealistic parameter settings for losses to be large. 20 For example, a time horizon of 35 years consistently yields losses on a level of less than 2 percent. 21 The reason for the losses being small is that with a rolling horizon, consumption is initially higher than with an in…nite horizon.…”

Section: Terminal Constraints End Values and Pro…ts Lossesmentioning

confidence: 99%

“…Furthermore, in discussions I have had with representatives of oil companies it comes clear that, not only are they using very high interest rates when calculating future pro…ts, but they do not start any new projects which do not yield expected pro…ts within [15][16][17][18][19][20] years. This suggests that stocks left in the ground after this time has a very low value for them, if any.…”

Section: Introducing Rolling Horizon Planningmentioning

confidence: 99%

See 3 more Smart Citations

Resource Prices and Planning Horizons

Spiro

2012

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper shows that a seemingly simple assumption, regarding the time horizon of economic agents, can reconcile the puzzling long run price dynamics of exhaustible resources such as oil, gas and metals. It does so by exploring the possibility that economic agents use a rolling planning horizon, meaning that they make a plan over a …nite number of years but update this plan on a regular basis. This behavior can be observed in the business plans of …rms, in US social security and in the extraction decisions of natural resource owners. While leaving other macroeconomic models intact, when used in models of natural resources rolling horizon planning alters the outcomes. It has the e¤ect of removing the scarcity consideration of resource owners, thus letting only operating costs and demand determine the extraction rate. This implies that extraction will be non-decreasing and resource prices non-increasing for a long period of time and that there will be no connection between the price growth and the interest rate -in line with the trends of a majority of exhaustible resources in the last century. A calibration of the model to the oil market yields a price which closely …ts the gradually falling real oil price after WWII and the sharply increasing price after 1998. It further suggests that, while long run scarcity was not an important parameter on the oil market in the 20th century, it has been important in shaping the oil price from around 1998 and onwards.JEL classi…cation: D80, Q31, Q41

show abstract

Section: Remaining Years To Exhaustion and Price Growthmentioning

confidence: 90%

Section: Introductionmentioning

confidence: 95%

Section: Terminal Constraints End Values and Pro…ts Lossesmentioning

confidence: 99%

Section: Introducing Rolling Horizon Planningmentioning

confidence: 99%

See 2 more Smart Citations

Resource Prices and Planning Horizons

Spiro

2012

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…The model utilized in this study builds on Ellis and Halvorsen [20] and Pindyck [21] regarding exploration activity. However, our model has substantially broadened the representation of the gas industry beyond that found in Pindyck's model.…”

Section: Literature Reviewmentioning

confidence: 99%

Research on Factors Affecting the Optimal Exploitation of Natural Gas Resources in China

Xiao

Wang

2016

Sustainability

View full text Add to dashboard Cite

This paper develops an optimizing model for the long-term exploitation of limited natural gas reserves in China. In addition to describing the life cycle characteristics of natural gas production and introducing the inter-temporal allocation theory, this paper builds the optimal exploitation model of natural gas resources within a gas field in the Ordos Basin as an example to analyze its exploitation scale and how influence factors, such as recovery rate, discount rate and the gas well exhausting cycle, affect the optimal exploration path of this gas field. We determine that an increase in the discount rate stimulates investors to invest more aggressively in natural gas exploitation in the early period due to the lower discounted value, thereby increasing the pace of the exploitation of natural gas and the exhaustion of gas fields. A higher recoverable factor implies more recoverable reserves and greater potential of increasing the output of gas fields. The exhaustion rate of gas wells affects the capability of converting capacity to output. When exhaustion occurs quickly in gas wells, the output will likely increase in the output rising period, and the output will likely decrease at a faster rate in the output reduction period. Price reform affects the economic recoverable reserves of gas fields.

show abstract

Do markup dynamics reflect fundamentals or changes in conduct?

2014

View full text Add to dashboard Cite

Persistent shifts in equilibria are likely to arise in oligopolistic markets and may be detrimental to the measurement of conduct, related markups and intensity of competition. We develop a cointegrated VAR (vector autoregression) based approach to detect long-run changes in conduct when data are difference stationary. Importantly, we separate the components in markups which are exclusively related to long-run changes in conduct from those explained solely by fundamentals. Our approach does not require estimation of markups and conduct directly, thereby avoiding complex problems in existing methodologies related to multiple and changing equilibria. Results from applying the model to US and five major European banking sectors indicate substantially different behavior of conventional raw markups and conduct-induced markups.

show abstract

Estimation of Market Power in a Nonrenewable Resource Industry

Cited by 31 publications

References 15 publications

Resource Prices and Planning Horizons

Resource Prices and Planning Horizons

Research on Factors Affecting the Optimal Exploitation of Natural Gas Resources in China

Do markup dynamics reflect fundamentals or changes in conduct?

Contact Info

Product

Resources

About