Exploitation and recycling of rare earths
Résumé
We study the exploitation of recyclable exhaustible resources such as rare earths and Phosphorus.We use a standard Hotelling model of resource exploitation that includes a primary sector and arecycling sector. We show that, when the primary sector is competitive, the price of the recyclableresource increases through time. This result stands in contrast to durable resources, for which theoptimal price path is either decreasing or U-shaped (Levhari and Pindyck, 1981). We then showa new reason why the price of an exhaustible resource may decrease: when the primary sector ismonopolistic, the primary producer has incentives to delay its production activities in order to delayrecycling. As a consequence, the price path of the recyclable resource may be U-shaped. We alsoshow that a technological improvement in the recycling sector increases the price in the short termbut decreases it late
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