Abstract
This paper provides a non-renewable resource extraction model with both technological change and resource exploration. Especially, we consider two types of technology, extraction technology and exploration technology. We show how these technologies affect efficient non-renewable resource extraction differently. Then, progress in extraction technology drops marginal revenue of extraction and resource price by changing the structure of those dynamics, while progress in exploration technology drops marginal revenue of extraction and resource price remaining the structure of those dynamics. Finally, we illustrate the difference becomes significant when innovative technologies are developed using numerical examples.
Highlights
As a means to secure scarce resources, technologies play a crucial role in both resource extraction and resource exploration
Progress in extraction technology drops the marginal revenue of extraction and resource prices by changing the structure of the dynamics, whereas progress in exploration technology drops the marginal revenue of extraction and resource prices by maintaining the structure of the dynamics
We have examined the dynamics of non-renewable resource extraction for a monopolistic producer using resource exploration and two types of technological change
Summary
As a means to secure scarce resources, technologies play a crucial role in both resource extraction and resource exploration. Lin and Wagner (2007) explain why the price path of many non-renewable resources empirically becomes almost constant by estimating the supply and demand function using the Slade (1982) framework. These earlier studies explain the effect of exploration and technological change on the use of non-renewable resources. It is important to incorporate both resource exploration and technological change into the same model when considering the efficient use of resources with fewer reserves.
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