TY - JOUR
T1 - A martingale characterization of the price of a nonrenewable resource with decisions involving uncertainty
AU - Deshmukh, Sudhakar D.
AU - Pliska, Stanley R.
N1 - Funding Information:
* This research was supported by NSF Grants SES-8212818 and ECS-8215640 and by the J. L. Kellogg Center for Advanced Studies in Managerial Economics and Decision Sciences. The authors wish to thank the referee for suggesting significant improvements in the presentation of the material in Sections 3 and 4.
PY - 1985/8
Y1 - 1985/8
N2 - This paper presents a general model of nonrenewable resource consumption and exploration decisions involving uncertainty about the time of occurrence of an event such as exhaustion, stock discovery, or a substitute development. The resulting price process is characterized in terms of necessary and sufficient conditions under which the price is expected to rise at a rate equal to, greater than, or less than the discount rate. The general model is illustrated and the price process and the optimal decisions are characterized by examining the three types of uncertainty indicated above.
AB - This paper presents a general model of nonrenewable resource consumption and exploration decisions involving uncertainty about the time of occurrence of an event such as exhaustion, stock discovery, or a substitute development. The resulting price process is characterized in terms of necessary and sufficient conditions under which the price is expected to rise at a rate equal to, greater than, or less than the discount rate. The general model is illustrated and the price process and the optimal decisions are characterized by examining the three types of uncertainty indicated above.
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U2 - 10.1016/0022-0531(85)90047-X
DO - 10.1016/0022-0531(85)90047-X
M3 - Article
AN - SCOPUS:0000588483
SN - 0022-0531
VL - 35
SP - 322
EP - 342
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 2
ER -