A Competitive Sector Depletion Allowance in the Context of an Intertemporal Dominant-firm Model

It is conceivable that the reaction of a government excluded from the cartelization of a strategic exhaustible resource (and suffering from a subsequent restriction in its supply) takes the form of a depletion allowance directed at home-country extractive firms in the industry. According to federal...

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Bibliographic Details
Published in:Recherches économiques de Louvain 1979-01, Vol.45 (2), p.179-193
Main Author: d'HOSPITAL, François MELESE
Format: Article
Language:English
Subjects:
Cartels
Competitive firms
Demand curves
Depletion allowance
Economic resources
Fringe
Marginal revenue
Market prices
Modeling
Natural resources conservation
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Summary:It is conceivable that the reaction of a government excluded from the cartelization of a strategic exhaustible resource (and suffering from a subsequent restriction in its supply) takes the form of a depletion allowance directed at home-country extractive firms in the industry. According to federal law, a depletion allowance is a tax reduction on income proportional to the amount of reserves extracted. Presumably the aim of such a manœuver would be to speed up the rate of extraction at home (i.e. tilting the extraction profile of home-country firms towards the present) thereby relieving short-run excess demand and simultaneously reducing dependence on foreign owned and controlled reserves. (Clearly, allusion can be made to the 1973-74 OPEC oil embargo and to the subsequent policy decisions made by governments of non-OPEC oil producing countries).
ISSN:0770-4518
1782-1495
DOI:10.1017/S0770451800081331