Dynamic Efficiency: Hotelling’s Rule Environmental Economics II Spring 2014 Lecture based in part on Harris and Roach 2013 and Field 2008 2. $700/th bd ft for redwood.) Harold Hotelling (1895–1973) who described the idea in an Economics Journal article, ‘Stability in competition’ (1929). See our Privacy Policy and User Agreement for details. The Hotelling rule was in the 19revisited , when it became 70s thatapparent it may not be consistent with an emerging development concept, that of sustainable development. Hotelling’s Law is also referred to as the principle of minimum differentiation or Hotelling’s linear city model. Recall that under the null hypothesis t has a distribution with n -1 degrees of freedom. Hotelling's rule defines the net price path as a function of time while maximizing economic rent in the time of fully extracting a non-renewable natural resource.The maximum rent is also known as Hotelling rent or scarcity rent and is the maximum rent that could be obtained while emptying the stock resource. I showed this in EEI. Hotelling’s rule: two interpretations Equation 14.14c is known as Hotelling’s rule for the extraction of non-renewable resources. Prof. Prabha Panth Rule Draw on board an explanation for static efficiency based on MC and MB showing total benefit and costs. . Environmental Economics II Spring 2014 It was first shown by Harold Hotelling, and is widely used in the theory of the firm.The lemma can be stated as: The rate of increase in profits from a price increase is … All Exhaustible Nat Resource returns must come from price change Price Goes Up a Rate of Interest Hotelling’s Rule Price of resource is P(t) price at time 1 is P(1). These slides cover present value calculations and then dynamic efficiency for non-renewable resource extraction. Looks like you’ve clipped this slide to already. Hotelling rule two are discussed in the text. If you continue browsing the site, you agree to the use of cookies on this website. NON-RENEWABLE RESOURCES The envelope theorem for unconstrained maximization 4 5.2. . HOTELLING’S THEORY OF OPTIMUM EXTRACTION OF From: spatial competition, theory of in The Concise Oxford Dictionary of Politics » n ARE211, Fall2012 COMPSTAT1: THU, OCT 25, 2012 PRINTED: AUGUST 22, 2012 (LEC# 19) Contents 5. See our User Agreement and Privacy Policy. Hotelling Model We first take the locations of the sellers as given (afterwards we are going to determine them endogenously) and assume firms compete in prices. Osmania University. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. Is a managers personal discount rate is very high, she or he might extract all now and not wait for the next period. If unanticipated, Hotelling rule no longer holds If anticipated, Hotelling rule holds and E 0 is lower while E 1 is higher than without demand growth. 3 Industrial Organization-Matilde Machado The Hotelling Model 5 4.2. You can change your ad preferences anytime. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. as ”Hotelling’s Lemma”. Clipping is a handy way to collect important slides you want to go back to later. Env-Econ 101: Hotelling's Rule Part 1 As with any good economic model/principle, let's start with a few assumptions to a) motivate the problem, b) set the stage, and c) simplify the explanation to cut off the fat and get to the meat. If you continue browsing the site, you agree to the use of cookies on this website. in value over time, according to the Hotelling rule; this is not generally true for canonical applications such as environmental values threatened by a dam or other development. Hotelling-rule. Hotelling (1929), Chamberlin (1933), and Robinson (1933) introduced prod-uct differentiation. . . Looks like you’ve clipped this slide to already. In recent years, an increasing number of democracies have adopted a runoff rule to elect their president. . The maximum rent is also known as Hotelling rent or scarcity rent and is the maximum rent that could be obtained while emptying the stock resource. Lecture based in part on Harris and Roach 2013 and Field 2008. Hotelling’s Rule on Equilibrium Net Resource Price According to Hotelling’s rule, the net price of a resource should rise at a rate equal to the discount rate. This is illustrated using a two-period model with examples using both graphs and Excel spreadsheets. HOTELLING'S LAW meaning & explanation. Hotelling's rule is defining the net price path as a function of time while maximising rent in the time of fully extracting a non-renewable natural resource. sis. Use these summary statistics to detect The envelope . The notion of sustainable development was al. Hotelling’s segment model introduces different preferences in consumers and provides the foundation for location theory by assuming . Such consistency issues play an Now customize the name of a clipboard to store your clips. The rule says that a unit of resource extracted in any period should yield the same rent, in present value terms. an overview of hotelling's rule, how it is derived, and practical applications Comparative Static: Discount Factor What if the discount factor decreases (interest Welfare Economics and Millennium Development Goals, No public clipboards found for this slide, 010 hotelling optimum exhaustion of a non renewable resource, Interested with Asset mgnt.. now serving in formulating management policies of state property from the state spoils. In 1931, Hotelling showed how the rules that apply to the optimum extraction of a non renewable resource differ from that of a produced product, in perfect competition. . iv CONTENTS 4.7 Terms, study questions, and exercises . Al- condition which, at the market level, implies Dynamic Efficiency: Hotelling’s sets a decision rule to be applied at some future period t1, when getting to the time period t1, the decision maker should not decide to change the rule he (she) has previously determined. Statistics 202: Data Mining c Jonathan Taylor Outliers General steps Build a pro le of the \normal" behavior. Present Value Calculations Vo = Vn/(1 + r)n $1000 next year is worth today: Vo= $1000/(1.05) = $953 $1000 in seven years is worth today: Vo= $1000/(1.05)7 = $710 It is often expressed in the form (14.15) The Hotelling rule is an intertemporal efficiency condition We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. . We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. 从社会整体出发，为保证资源能够给人类带来最大的福利，需要确定每一时期的最 优资源存量规模。当增加一个单位资源的保有的利益与所付出的成本相等时 （Hotelling rule），资源才有可能得到保存。文档收集自网络，仅用于个人 ptA = (1 r)tqA a ... – A free PowerPoint PPT presentation (displayed as a Flash slide show) on PowerShow.com - id: 259bb9-ZDc1Z Toggle navigation Help (e.g. If you continue browsing the site, you agree to the use of cookies on this website. Intuition: As the interest rate increases, money in the future is worth less, so we want to extract more now and less in the future. Clipping is a handy way to collect important slides you want to go back to later. Hotelling’s Lemma is simply an application of the envelope theorem. . . 010 hotelling optimum exhaustion of a non renewable resource, Measuring and mitigating natural resource scarcity, Why Choose All County Community Property Management in Temecula, CA, Environmental and Natural Resource Protection, PROBLEMS OF SCARCITY LEADS TO ECONOMIZING OF RESOURCES, Sustainable Fishery Management / Sustainable and Optimum, No public clipboards found for this slide. Some have argued, however, that the benefits of such a rule are dubious at best. Miller and Upton (1985) use the valuation principle. A note on Hotelling's rule Andreas Pfingsten In 1931, Hotelling developed a rule which became a central efficiency criterion in natural resource economics. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. . The total stock of resources is assumed to be known and of equal quality, and all the market players are assumed to have full knowledge. The pro le generally consists of summary statistics of this \normal" population. Hotelling's lemma is a result in microeconomics that relates the supply of a good to the profit of the good's producer. If you continue browsing the site, you agree to the use of cookies on this website. . The basic Hotelling Rule is based on a number of simplifying assumptions. Preface to the First Edition Principal component analysis is probably the oldest and best known of the techniques of multivariate analysis. Now customize the name of a clipboard to store your clips. http://www.theaudiopedia.com What is HOTELLING'S LAW? 2 where issue space is so inherently multidimensional that majority rule is cyclical (see social choice) and there is no stable equilibrium point for politicians to seek. This is the so-called Hotelling rule, the most well known result in natural resource economics. To motivate Hotelling's \(T^2\), consider the square of the t-statistic for testing a hypothesis regarding a univariate mean. You can change your ad preferences anytime. It was first introduced by Pear-son (1901), and developed independently by Hotelling (1933). Here the mine owner has to weigh the present price with the expected future price, if he wishes to conserve the resource. 1. This states that the stock market value of a property with unextracted resources is equal to the present value of its resource this will 3 1.2 The Envelope Theorem and Constrained Optimization Now let us turn our attention to the case of constrained optimization. 1. Foundations of Comparative Statics 1 5.1. See our User Agreement and Privacy Policy. Discounting by the rate of interest of 10% = Rs.660/1.1 = Rs.600 This satisfies the NPV rule that P0Q0 = (P1Q1)/ (1+r) Hotelling’s Fundamental Equation or Rule: “The optimum path of depletion of a nonrenewable resource is 16. Dynamic Efficiency & Hotelling’s Rule - Free download as Powerpoint Presentation (.ppt), PDF File (.pdf), Text File (.txt) or view presentation slides online. See our Privacy Policy and User Agreement for details. P n = 100 (1+r) n • Under market conditions, a nonrenewable resource will be used up at a certain optimal depletion rate , and this rate will be faster at higher discount rate. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. What does HOTELLING'S LAW mean? Constrained Optimization Principal component analysis is probably the oldest and best known of the theorem. Osmania University wait for the next period and costs: two interpretations Equation is... A two-period model with examples using both graphs and Excel spreadsheets and 2013. Efficiency based on MC and MB showing total benefit and costs the present price with expected... 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