Essays on Resource Exploitation under Fixed Costs

Research output: ThesisDoctoral ThesisCollection of Articles

Researchers

  • Eero Sillasto

Research units

Abstract

This dissertation consists of three essays on resource economics. In these essays I analyze the implementation of fixed costs for activities with a finite amount of production. I assume that the fixed costs are a characteristic of an activity and the continuous costs must be incurred for not losing the activity permanently. I show that, if the economic activity is finite in its duration, fixed costs induce minimal scales and also discrete effects on market outcomes. I show further how such discrete effects influence, for instance, the exploitation paces, the exploitation order and the price path. The first essay concentrates on the efficient solution of exploiting exhaustible deposits of a commodity under fixed costs. In contrast to the previous literature, the efficient solution is well defined. I derive the characteristics of an efficient solution, and show that it cannot be decentralized as a competitive allocation, because the price-taking agents would act strategically. The efficient order of exploiting the deposits, which is a classical resource economics question, depends both on the deposits' stock allocations and on their cost structures. The second essay describes strategic interactions for private deposit owners under fixed costs.I show that there are equilibria in open-loop strategies, in which deposits are exploited concurrently, and others, in which they are exploited sequentially. I show further that agents do not exit simultaneously and that there are no symmetric equilibria. The third essay introduces the entry. I limit my attention to economic activity where the projects have each a fixed production time, and also a given and discrete impact on other projects executed concurrently with them. I describe an entry game where the entrants influence other entrants' entry decisions by pre-empting. I show that the entry order and the level of industry concentrationare distorted when compared to the efficient solution.

Details

Translated title of the contributionEsseitä resurssien käytöstä
Original languageEnglish
QualificationDoctor's degree
Awarding Institution
Supervisors/Advisors
Publisher
  • Aalto University
Print ISBNs978-952-60-8633-0
Electronic ISBNs978-952-60-8634-7
Publication statusPublished - 2019
MoE publication typeG5 Doctoral dissertation (article)

    Research areas

  • resource exploitation, finite production, fixed costs, game, open-loop strategy, entry

ID: 36399259