Sequential development and exploitation of an exhaustible resource: Do monopoly rights promote conservation?

Carolyn Fischer, Ramanan Laxminarayan

Research output: Contribution to journalArticlepeer-review

24 Scopus citations

Abstract

This paper explores the problem of sequential exploitation of exhaustible resources by a monopolist, when a setup cost must be incurred to access the next pool. Under certain circumstances, the monopolist will always follow a more conservationist path of extraction and delay the introduction of new resource pools compared to a social planner. However, with other forms of consumer demand, the monopolist may exhaust the resource more quickly, especially if many new options will follow. These results may apply especially to depletable resources like antibiotics or biotech products, for which significant research and development costs are required, followed by monopoly rights conferred by patents.

Original languageEnglish (US)
Pages (from-to)500-515
Number of pages16
JournalJournal of Environmental Economics and Management
Volume49
Issue number3
DOIs
StatePublished - May 2005
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

Keywords

  • Antibiotics
  • Economics of resistance
  • Invention
  • Monopoly
  • Natural resources
  • Setup costs

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