Bubbles in Prices of Exhaustible Resources

32 Pages Posted: 24 Aug 2007 Last revised: 26 May 2021

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

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Date Written: August 2007

Abstract

Aside from the equilibrium that Hotelling (1931) displayed, his model of non-renewable resources also contains a continuum of bubble equilibria. In all the equilibria the price of the resource rises at the rate of interest. In a bubble equilibrium, however, the consumption of the resource peters out, and a positive fraction of the original stock continues to trade forever. And that may well be happening in the market for high-end Bordeaux wines.

Suggested Citation

Jovanovic, Boyan, Bubbles in Prices of Exhaustible Resources (August 2007). NBER Working Paper No. w13320, Available at SSRN: https://ssrn.com/abstract=1008814

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

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