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

Tinbergen Institute Discussion Paper 11-014/1

57 Pages Posted: 26 Jan 2011

See all articles by Roel van Veldhuizen

Roel van Veldhuizen

WZB Berlin Social Science Center

Joep Sonnemans

University of Amsterdam - Amsterdam School of Economics (ASE)

Multiple version iconThere are 2 versions of this paper

Date Written: January 20, 2011

Abstract

This study uses the methods of experimental economics to investigate possible causes for the failure of the Hotelling rule for nonrenewable resources. We argue that as long as resource stocks are high enough, producers may choose to (partially) ignore the dynamic component of their production decision, shifting production to the present and focusing more on strategic behavior. We experimentally vary stock size in a nonrenewable resource duopoly setting and find that producers with high stocks indeed pay significantly less attention to variables related to dynamic optimization, leading to a failure of the Hotelling rule.

Keywords: Experiments, Nonrenewable Resources, Dynamic Oligopoly

JEL Classification: C90, Q31, Q41, L13

Suggested Citation

van Veldhuizen, Roel and Sonnemans, Joep, Nonrenewable Resources, Strategic Behavior and the Hotelling Rule: An Experiment (January 20, 2011). Tinbergen Institute Discussion Paper 11-014/1, Available at SSRN: https://ssrn.com/abstract=1746883 or http://dx.doi.org/10.2139/ssrn.1746883

Roel Van Veldhuizen (Contact Author)

WZB Berlin Social Science Center ( email )

Reichpietschufer 50
D-10785 Berlin, 10785
Germany

Joep Sonnemans

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
1018 WB Amsterdam
Netherlands
+31 20 525 4249 (Phone)
+31 20 525 5283 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
145
Abstract Views
1,133
rank
255,116
PlumX Metrics