Strike When the Force Is with You: Optimal Stopping with Application to Resource Equilibria
Optimal investment in a nonrenewable resource project occurs when the rate of increase of the project's forward value falls to the force of interest. This stopping rule yields a financial interpretation of resource quality as being a property of the project rather than of individual units of reserves. It also leads to re-interpretations of (a) rent as the present value of the project rather than of units of reserves and (b) Hotelling's insight as, not a rule for the path of rents, but an equilibrium algorithm for price. The analysis is extended to sequential development of pesticides, antibiotics, and forests. Copyright 2007, Oxford University Press.
Year of publication: |
2007
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Authors: | Davis, Graham A. |
Published in: |
American Journal of Agricultural Economics. - Agricultural and Applied Economics Association - AAEA. - Vol. 89.2007, 2, p. 461-472
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Publisher: |
Agricultural and Applied Economics Association - AAEA |
Saved in:
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