Equilibrium Exhaustible Resource Price Dynamics

Abstract

We develop equilibrium models of an exhaustible resource market where both prices and extraction choices are determined endogenously.Our analysis highlights a role for adjustment costs in generating price dynamics that are consistent with observed oil and gas forward prices as well as with the two-factor prices processes that were calibrated in Schwartz and Smith (2000).Stochastic volatility aries in our two-factor model as a natural consequence of production for oil and natural gas prices.Differences between the endogenous price processes considered in earlier papers can generate significant differences in both financial and real option values.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 32 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.