Exploration in competitive nonrenewable resource markets : an extension of Pindyck's perfect foresight model

Abstract

Pindyck's model of exploration for, and production of, a non-renewable resource (Pindyck 1978) is extended so that the production cost function may depend separately on concurrently available reserves and on the total amount of past production. A method for obtaining the optimal trajectory of parameterised specifications of the model is tested on elaborations of a corrected version of the parameterised specification used by Pindyck in his paper. The initial price for each simulation is tabulated.