Gérard Gaudet

Université de Montréal | UdeM · Sciences économiques

The theoretical literature following Hotelling (J Polit Econ 39:137–175, 1931) assumed that all nonrenewable resource needs are satisfied by one type of resource (e.g. “oil”), extractible at different per-unit costs. This formulation implicitly assumes that all users are the same distance from each resource pool, that all users can switch costlessl...

We provide an introductory review to the application of the theory of incentives under asymmetry of information to the exploitation and management of natural resources. We concentrate mostly on principal-agent problems with adverse selection as posed by the regulation of nonrenewable resources, stressing the fact that the inherently dynamic nature...

This paper examines a dynamic game of exploitation of a common pool of some renewable asset by agents that sell the result of their exploitation on an oligopolistic market. A Markov Perfect Nash Equilibrium of the game is used to analyze the effects of a merger of a subset of the agents. We study the impact of the merger on the equilibrium producti...

We consider a renewable resource being exploited in common by firms that compete both in the output market and in the exploitation of the resource. We show that the introduction of the slightest cost differentiation among the firms can have a drastic effect on the nature of the equilibria that may be expected as compared to the identical cost case....

We study the effects on the food price of introducing biofuels as a substitute for fossil fuel in the energy market. Energy is supplied by a price-leading oil cartel and a competitive fringe of farmers producing biofuel. Biofuel production shares a finite land resource with food production. A positive relationship results between energy and food pr...

We take a capital asset pricing approach to the determination of the price of a nonrenewable natural resource in the case where the resource is durable, in the sense that once extracted it becomes a productive asset held above ground. The portfolio choice is then made up of the following assets: a stock of nonrenewable resource held in the ground t...

Interest in recycling of forest products has grown in recent years, one of the goals being to conserve trees or possibly increase their number to compensate for positive externalities generated by the forest and neglected by the market. This paper explores the issue as to whether recycling is an appropriate measure to attain such a goal. We do this...

We analyze the exploitation of an antibiotic in a market subject to open access on the part of antibiotic producers to the common pool of antibiotic efficacy. While the market equilibrium depends only on current levels of antibiotic efficacy and infection of the epidemiological system, the social optimum accounts for the dynamic externalities which...

Uncertainties as to future supply costs of nonrenewable natural resources, such as oil and gas, raise the issue of the choice of supply sources. In a perfectly deterministic world, an efficient use of multiple sources of supply requires that any given market exhausts the supply it can draw from a low cost source before moving on to a higher cost on...

Natural resource stocks held in situ are physical assets. Equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere. I discuss a number of factors relating to the evolution of extraction costs, to the durability of the resource, to market structure...

We fully characterize the optimal time paths of production and water usage by an agricultural and an oil sector that share a limited water resource. We show that for any given water stock, if the oil stock is sufficiently large, it will become optimal to have a phase during which the agricultural sector is inactive, followed by a phase during which...

We derive conditions that must be satisfied by the primitives of the problem in order for an equilibrium in linear Markov strategies to exist in some common property natural resource differential games. These conditions impose restrictions on the admissible form of the natural growth function, given a benefit function, or on the admissible form of...

Xue for comments on earlier drafts, and to FCAR and SSHRCC for financial support.

We analyze the behavior of a nonrenewable resource cartel that anticipates being forced, at some date in the future, to break up into an oligopolistic market in which its members will then have to compete as rivals. Under reasonable assumptions about the value function of the individual firms in the oligopolistic equilibrium that follows the breaku...

It is often thought that a tariff reduction, by opening-up the domestic market to foreign firms, should lessen the need for a policy aimed at discouraging domestic mergers. This implicitly assumes that the tariff in question is sufficiently high to prevent foreign firms from selling in the domestic market. However, not all tariffs are prohibitive,...

We consider an industry characterized by simultaneous competition between the producer of a primary good, and recylers who are Cournot rivals. Two important factors influence the effect of recycling on the equilibrium outcome and on the primary producer's market power: the structure of production costs, and the time lag between primary production a...

Static oligopoly analysis predicts that if a single firm in Cournot equilibrium were to be forced to marginally contract its production, its profits would fall. On the other hand, if all the firms were simultaneously forced to reduce their production, thus moving the industry towards monopoly output, each firm's profit would rise. We show that thes...

Many resources extracted under the rule of capture are not utilized immediately but are stored instead for later use: oil is stockpiled; fish are frozen; groundwater is bottled; rivers are dammed; land, deforested as the way to establish title, remains uncultivated. We examine the positive and normative effects of such storage. Privatization of com...

Analyses of trade quotas typically assume that the quota restricts the flow of some nondurable good. Many real-world quotas, however, restrict the stock of durable imports. We consider the cases where (1) anyone is free to export against such quotas and where (2) only those allocated portions of the total quota are free to export against such quota...

Following the IPCC's report (2005), which recommended the development and the use of carbon capture and sequestration (CCS) technologies in order to achieve the environmental goals, dened by the Kyoto Protocol, the issue addressed in this paper concerns the optimal strategy regarding the long-term use of CCS technologies. The aim of this paper is t...

We study the cost-of-adjustment model of investment when there is asymmetry of information between owners (the principal) and managers (the agent). Information asymmetry distorts the relationship between investment and the cost of capital for all agent types, and a regime of inaction appears over a certain cost range, in an observationally differen...

We study the incentives for a "diagonal" merger between two Internet Service Providers, one a wireless retail only ISP in two origination markets, and the second a vertically integrated wired retailer in one market and an upstream provider in the other. The merger's effects depend on differentiation in access modalities; only with high differentiat...

Consider a general equilibrium framework where the marginal cost of extraction from several deposits of an exhaustible resource is constant in terms of an inexhaustible perfect substitute, and that this cost differs between deposits. The instantaneous rate of production from the inexhaustible resource is subject to a capacity constraint. We show, u...

When population is increasing, characterizing the optimal water consumption path is complicated by the fact that the underlying dynamics of the water stock is contingent on the level of the stock itself. We propose a method of constructing the optimal path in this case. Since population is increasing, the optimal consumption path may involve refrai...

A partial equilibrium analysis shows that a pool of natural resources with constant unit costs of extraction has to be exploited in strict increasing cost order. Kemp and Long [1980] have shown that it is not necessarily the case in a general equilibrium framework. In a consumption-leisure trade-off model, we show that the optimal order of exploita...

This paper generalizes Hotellings (1931) theory of nonrenewable resources to situations where resource pools and their users are distributed spatially. Extraction and transport costs are assumed to be linear in the rate of extraction, but utilization of each deposit may require a setup cost. While Herndahls (1967) analysis of the socially optimal u...

This paper examines a characteristic of common property problems unmodeled in the published literature: extracted common reserves are often stored privately rather than sold immediately. We examine the positive and normative effects of such storage, Privatization of common reserves through storage may eliminate inefficiency altogether but the prema...

Static oligopoly analysis predicts that if a single firm in Cournot equilibrium were to be constrained to contract its production marginally, its profits would fall. on the other hand, if all the firms were simultaneously constrained to reduce their productino, thus moving the industry towards monopoly output, each firm's profit would rise. We show...

This paper generalizes Hotelling?s (1931) theory of nonrenewable resources to situations where resource pools and their users are distributed spatially. Extraction and transport costs are assumed to be linear in the rate of extraction, but utilization of each deposit may require a setup cost. While Herfindahl?s (1967) analysis of the socially optim...

On montre dans cette étude que sous des hypothèses standards concernant les préférences, il peut s'avérer que l'ordre optimal d'exploitation de ressources naturelles de coûts moyens d'exploitation constants ne soit pas l'ordre que suggère l'analyse d'équilibre partiel dans ce genre de problème, à savoir exploiter en priorité à chaque instant la res...

Whether vertical integration between a downstream oligopolist and an upstream oligopolist is profitable for an integrated pair of firms is shown to depend on whether one means by this that profits increase no matter what other firms do, that all integrated firms are better off when all firms are integrated than when none are, or simply that no down...

We analyze industry equilibrium and incentive to compatibility when goods produced by different producers generate utility only when consumed as component parts of a system. We assume the presence of two systems, each composed of some basic component and a set of differentiated complementary products. The combination of complementarity between the...

Consider a general equilibrium framework where the marginal cost of extraction from several deposits of an exhaustible resource is constant in terms of an inexhaustible perfect substitiute and differs between deposits. The instantaneous rate of productionfrom the inexhaustible resourcce is subject to a capacity constraint. We show, under standard a...

In existing papers on dynamic incentive contracts, the dynamic structure of the principal-agent relationship arises exclusively from the ability of the principal to learn about the hidden information over time. In this paper we deal with a different source of dynamics, which is considered standard in all areas of economics other than the informatio...

We investigate investment behavior when there is asymmetry of information between owners (the principal) and managers (the agent). The model accepts the standard cost-of-adjustment model as a particular case and is directly compared with it. For all types, information asymmetry distorts the relationship between investment and the cost of capital, a...

We study the optimal valuation of semi-renewable resources, like groundwater, under different assumptions as to the evolution of the population. When the population is either constant or decreasing, valuations of flow and stock resources are identical. With an increasing population however, an optimal consumption policy may involve refraining from...

R ´ ESUMÉESUM´ESUMÉ. – Une analyse enéquilibreen´enéquilibre partiel suggèresugg`suggère qu'un ensemble de gisements de ressources naturelles de cô ut moyens d'extraction constants devraitêtredevraitˆdevraitêtre exploitéexploit´exploité en stricte s ´ equence, par ordre de cô uts croissants. KEMP et LONG [1980] ont montrémontr´montré qu'il n'enétai...

The authors study optimal nonrenewable resource royalty contracts when the extracting agent has private information on costs. This is a dynamic incentive problem in which the repeated relationship between the principal and the agent is constrained by initial reserves. Commitment is limited to one period and costs are intertemporally independent. Co...

Previous studies in organizational economics and international business research have not tested a property rights view on the allocation of decision rights (DR) in joint ventures (JVs). The paper offers a test of the property rights explanation by using data from Hungarian JVs. Our analysis derives the following hypothesis: The more important the...

We study the incentives for a "diagonal" merger between two Internet Service Providers, one a wireless retail only ISP in two origination markets, and the second a vertically integrated wired retailer in one market and an upstream provider in the other. The merger's effects depend on differentiation in access modalities; only with high differentiat...

We study the effect of anti-dumping laws in a differentiated products quanti - ty-setting oligopoly. Dumping may or may not occur in the model and may or may not be reciprocal. We show that the effect of adopting an anti-dumping policy on the welfare of the importing country is ambiguous. It can even lead to an increase in the consumers’ surplus in...

Book chapter without abstract

The endogenous merger model of Kamien and Zang (QJE, 1990) is generalized to price competition with perfect complements and used to show that some socially desirable mergers will fail to occur. We also clarify the link between this merger model and the ‘exogenous merger’ literature.

The authors consider the competitive equilibrium of an economy with technological uncertainty in the production of a composite good and in the extraction of a nonrenewable natural resource. The familiar Hotelling-type rule takes the form of the intertemporal asset-pricing equation of portfolio theory. It characterizes the evolution of the resource...

This paper provides sufficient conditions for the existence of a unique Cournot equilibrium. Previous uniqueness results have depended on an assumption of non-degeneracy of equilibrium. As we illustrate, this assumption often fails in multi-stage games with proper Cournot subgames. Since our uniqueness results do not depend on this assumption, they...

Price and quantity competition are compared in the dynamic game framework of a nonrenewable natural resource duopoly. It is shown that a price-decision-rule (quantity-decision-rule) strategy dominates, in terms of a higher present value of the initial resource stocks, if the resources are complements (substitutes). This result is shown to hold for...

RÉSUMÉ Ce texte étudie l’effet de la taxation sur le sentier d’extraction d’une ressource naturelle non renouvelable en situation de concurrence parfaite. Il s’agit d’une synthèse de travaux récents sur le sujet. Quoique le cadre d’analyse soit défini de façon générale, on y traite de façon plus particulière d’une taxe forfaitaire, d’une redevance...

Cet article a deja fait l'objet d'une presentation comme publication de la station dans la Bibliographie No 5,1989, reference 320.

In this paper we derive the Hotelling rule of optimal natural resource depletion, modified to account for uncertainty in rates of return. It is shown that in the presence of risk aversion, the rule implies that the expected equilibrium rate of increase of net resource price must equal the expected rate of interest if and only if there exists a zero...

*INRA Station d'Economie et Sociologie rurales CRA Auzeville BP 27 31326 CASTANET-TOLOSAN (FRA) (No 89-12) Diffusion du document : INRA Station d'Economie et Sociologie rurales CRA Auzeville BP 27 31326 CASTANET-TOLOSAN (FRA) (No 89-12)

This paper considers a differentiated nonrenewable natural resource duopoly. The outcome of a Cournot type game, where both producers compete in quantities, is compared to that of a Bertrand type game, where both producers compete in prices. It is shown that a Cournot game yields a higher present value for the resource stocks if the resources are s...

In this paper, we report on some results concerning the comparison of Cournot and Bertrand equilibrium price paths in the case of a differentiated nonrenewable resource extraction duopoly. In the Cournot model of oligopoly the strategy variables of the firms are the quantities produced. In the Bertrand model, on the other hand, prices are the strat...

This paper analyses the distortionary effects of the corporate income tax on the output path of the resource sector and on the allocation of resources between the mining and non-mining corporate sectors. The cost of capital for a resource industry facing a corporate income tax is derived, as well as the resulting effective tax rate on capital incom...

It Is Widely Believed That Exhaustible Resource Monopolies Do Not Enjoy As Much Market Power As Standard Non Resource Monopolies, and May Even Produce in a Socially Optimum Way. We Argue That This Paradoxical Result Arises From an Inappropriate Comparison Methodology. When Similar Assumptions Are Applied to the Resource, and the Conventional, Cases...

On analyse, pour le cas particulier d'une entreprise exploitant une ressource non renouvelable, l'effet de l'impôt sur le revenu des sociétés sur le coût du capital et sur les décisions d'investissement et d'exploitation. On y fait ressortir la nécessité de tenir compte de la rente minière, ainsi que du traitement fiscal prévu pour le moment de la...

Le but de cet article est d'adapter au problème de gestion optimale du gisement minier la théorie dynamique de la firme avec capital et coûts d'ajustement. On constate qu'un résultat traditionnel de la théorie économique de la mine, qui veut que le taux d'extraction optimal décroisse continuellement dans le temps quand les coûts d'extraction ne dép...

A discussion of the main controversies over the tax treatment of the natural resource industries, of optimal taxation in relation to various policy objectives, and of the possibility of attaining these objectives through the main forms of taxation and royalties now in existence.

The purpose of this paper is to comment on the investment equations of the CANDIDE model. The formulation of these equations is based on Jorgenson's theory of investment which is frequently used as a basis for investment expenditures analysis. In the first two sections the authors endeavour to situate Jorgenson's model with respect to other approac...

Interest in recycling of forest products has grown in recent years, one of the goals being to conserve the stock of trees or possibly increase it to compensate for positive externalities generated by the forest and neglected by the market. This paper explores the issue as to whether recycling is an appropriate measure to attain such a goal. We do t...

This paper extends the standard model of self-enforcing dynamic international environmental agreements by allowing the length of the period of commitment of such agreements to vary as a parameter. It analyzes the pattern of behavior of the size of stable coalitions, the stock of pollutant and the emission rate as a function of the length of the per...