Journal Article

Competition in Markets for Depletable Resources with Setup Costs

Feb 3, 2005 | Carolyn Fischer


This paper analyzes the impact on exhaustible resource markets of setup or shutdown costs, a sparsely analyzed category of nonconvex production technologies. This paper proves that, even under idealized circumstances for competition, a competitive equilibrium will fail to exist in the presence of setup costs, for any utility and cost functions such that a planner would exploit exhaustible resource pools sequentially.