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Roel van Veldhuizen . Photo

Roel van Veldhuizen

Senior lecturer

Roel van Veldhuizen . Photo

Nonrenewable Resources, Strategic Behavior and the Hotelling Rule : An Experiment

Author

  • Roel van Veldhuizen
  • Joep Sonnemans

Summary, in English

We use a laboratory experiment to investigate a novel reason for the lack of empirical support for the Hotelling rule for nonrenewable resources. Specifically, we test whether producers with large resource stocks focus less on the dynamic component of their extraction decision, making them shift extraction to the present and focus more on strategic behavior. Exploiting exogenous variation in stock size in a nonrenewable resource duopoly laboratory experiment, we find that producers with large stocks indeed pay significantly less attention to dynamic optimization, and shift extraction to the present, leading them to overproduce relative to the Hotelling rule.

Publishing year

2018-06-01

Language

English

Pages

481-516

Publication/Series

Journal of Industrial Economics

Volume

66

Issue

2

Document type

Journal article

Publisher

Wiley-Blackwell

Topic

  • Economics

Status

Published

ISBN/ISSN/Other

  • ISSN: 0022-1821