Pierre Lasserre

Information as a substitute for inventories

Abstract In recent years, the ratio of inventories to sales in North American manufacturing has fallen without the offsetting increases in unfilled orders or price variation that are predicted by some theoretical models. The explanation offered here is that in the face of falling relative costs of communications, firms will substitute information for inventories, thereby allowing their production systems to absorb a greater part of demand shocks. The implicit hypothesis that the demands for communications and inventories are therefore determined simultaneously is tested with data on Canadian inventories and on telecommunications between Canada and Europe and is not rejected.

On comparing monopoly and competition in exhaustible resource exploitation

Abstract It is widely believed that exhaustible resource monopolies do not enjoy as much market power as standard non-resource monopolies, and may even produce in a socially optimal way. We argue that this paradoxical result arises from an inappropriate comparison methodology. When similar assumptions are applied to the resource, and the conventional cases, we show that the resource monopoly behaves as expected, i.e., restricts supply.

Reserve and land prices with exploration under uncertainty

Abstract Arrow and Chang ( J. Econom. Environ. Manag. 9 , 1–10 (1982) analyze an exploration-extraction model with uncertainty about the distribution of deposits. Reserve prices do not exhibit any rising trend when the unexplored land area is big but, in order to know what happens when the unexplored area is smaller, “a probabilistic analysis not yet performed” (ibid. p. 10) is required. Their conjecture of a rising trend at less than the discount rate is confirmed. However, land prices can be expected to grow faster than reserve prices, which helps discriminate between Arrow and Changs, and other rationalizations of the failure of resource prices to rise at the discount rate.

Adverse selection and finite-horizon insurance contracts

Abstract We use a particular contract to analyze three issues regarding adverse selection, monopoly, and the use of time within a finite horizon: the description and existence of an epsilon-equilibrium (ϵ-equilibrium), the achievement of a Nash equilibrium, and the optimality of risk revelation. Among the results obtained, we show that, at equilibrium, low-risk individuals buy full insurance most of the time and high-risk individuals always buy full insurance. We also show that the equilibrium with risk revelation is a Nash equilibrium. These results are compared with those of the self-selection mechanism [Stiglitz (1977)] and of the ϵ-equilibrium under moral hazard [Radner (1981)].

Capital income taxation, depletion allowances, and nonrenewable resource extraction

Abstract This paper analyses the distortionary effects of the corporate income tax on the output path of the resource sector and on the allocation of resources between the mining and non-mining corporate sectors. The cost of capital for a resource industry facing a corporate income tax is derived, as well as the resulting effective tax rate on capital income. The comparison of the effective tax rates of the mining and non-mining sectors pays particular attention to the role played by the depletion allowance in assuring equal treatment.

Monopoly and the Preemption of Competitive Recycling

The paper shows that a monopolistic primary producer of a recycleable material will choose to preempt market entry by competitive recyclers unless the cost of producing virgin ingot is very high compared to the cost of reconditioning used material. Unlike earlier results, it is shown that in the absence of transaction costs on scrap sales competition by independent recyclers fails to reduce price below its full-monopoly level. Moreover, if transaction costs are present, the mere threat of entry by independent recyclers may raise the price above that level.

Rate-of-return regulated cost function: Shephard's lemma and curvature properties

In This Note, We Present the Appropriate Forms of Shephards Lemma, As Well As the Curvature and Homogeneity Properties, for the Case of a Rate-Of- Return Regulated Cost Function Where Capital Is a Quasi-Fixed Input.

Mathematical modelling in natural resources economics: Dynamic duality in resource economics : Theory and empirical usefulness

It is possible to think of numerous economic problems involving dynamic constrained optimization where dual representations exist and possibly can be characterized. One example arises in the theory of dynamic factor demand and, more generally, investment decisions. Its duality structure has been studied by Eptein in several papers. The extraction of non-renewable resources is an investment problem and, furthermore, specific boundary conditions must be satisfied at the date of exhaustion if it occurs in a finite time. This paper shows how the theory of dynamic duality can be worked out in such problems. A family of functions which satisfy the properties of the corresponding value function is also provided. While natural resource extraction is a prime candidate for empirical applications, other applications could be carried out in such areas as R and D, the management of information, and advertising.