Research ArticleOpen AccessGoogle Scholar indexed
Valuing Exhaustible Resource Ownership: General Equilibrium Assets-Markets versus Partial Equilibrium
Department of Economics, Morehouse College, Atlanta, Georgia, USA
- 1 Department of Economics, Morehouse College, Atlanta, Georgia, USA
Theoretical Economics Letters·Volume 08 (2018)·Pages 844–853·Published 19 March 2018·DOI10.4236/tel.2018.85059
Copy link · social · email
Abstract
This paper uses a general equilibrium assets-markets approach with arbitrageurs for valuing mineral resource deposit ownership. The results are contrasted with those delivered by a partial equilibrium approach. We show that in a general equilibrium assets-markets approach, arbitrageurs’ valuation of resource deposit rights commands a discount factor that adjusts not only for the time depreciation but also for changes in the resource stock size over time. A general equilibrium assets-markets approach with arbitrageurs leads to a more conservative management of exhaustible natural resources than a partial equilibrium approach does.
KeywordsConservation FinanceArbitrageursGeneral Equilibrium in Assets MarketsPartial EquilibriumMineral Rights OwnershipCapital MarketsResource Conservation
- Hotelling, H. (1931) The Economics of Exhaustible Resources. Journal of Political Economy, 39, 137-175. https://doi.org/10.1086/254195
- Geldrop, J. and Withagen, C. (1993) General Equilibrium and International Trade with Exhaustible Resources. Journal of International Economics, 34, 341-357. https://doi.org/10.1016/0022-1996(93)90054-2
- Meijden, G., Ploeg, F. and Withagen, C. (2015) International Capital Markets, Oil Producers and the Green Paradox. European Economic Review, 76, 275-297. https://doi.org/10.1016/j.euroecorev.2015.03.004
- Karp, L. (2011) The Environment and Trade. Annual Review of Resource Economics, 3, 397-417. https://doi.org/10.1146/annurev-resource-083110-115949
- Caselli, F. and Feyrer, J. (2007) The Marginal Product of Capital. The Quarterly Journal of Economics, 122, 535-568. https://doi.org/10.1162/qjec.122.2.535
- Hall, R. (2001) The Stock Market and Capital Accumulation. American Economic Review, 91, 1185-1202. https://doi.org/10.1257/aer.91.5.1185
- Merton, R. (1973) An Intertemporal Capital Asset Pricing Model. Econometrica, 41, 867-887. https://doi.org/10.2307/1913811
- Bradford, D. (1978) Factor Prices May Be Constant But Factor Returns Are Not. Economics Letters, 1, 199-203. http://EconPapers.repec.org/RePEc:eee:ecolet:v:1:y:1978:i:3:p:199-203 https://doi.org/10.1016/0165-1765(78)90024-1
- Karp, L. (2013) The Income and Production Effects of Leakage. University of California, Berkeley.
- Shortle, J. and Willett, K. (1986) Incidence of Water Pollution Control Costs: Partial vs. General Equilibrium Computations. Growth Change, 17, 2. https://doi.org/10.1111/j.1468-2257.1986.tb00051.x
- Dumas, B. (1993) Partial vs. General-Equilibrium Models of the International Capital Market. Working Paper No. 4446. National Bureau of Economic Research, Cambridge, MA. https://doi.org/10.3386/w4446
- Werner, J. (1987) Arbitrage and the Existence of Competitive Equilibrium. Econometrica, 55, 1403-1418. https://doi.org/10.2307/1913563
- Le Van, C. and Ba Minh, N. (2007) No-Arbitrage Condition and Existence of Equilibrium with Dividends. Journal of Mathematical Economics, 43, 135-152. https://doi.org/10.1016/j.jmateco.2006.05.010
- Bosi, S., Fontaine, P. and Le Van, C. (2016) Interest Rates Parity and No Arbitrage as Equivalent Equilibrium Conditions in the International Financial Assets and Goods Markets. Mathematical Social Sciences, 82, 26-36. https://doi.org/10.1016/j.mathsocsci.2016.04.002