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. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. 3 1.2 The Envelope Theorem and Constrained Optimization Now let us turn our attention to the case of constrained optimization. . From: spatial competition, theory of in The Concise Oxford Dictionary of Politics » A note on Hotelling's rule Andreas Pfingsten In 1931, Hotelling developed a rule which became a central efficiency criterion in natural resource economics. 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. In recent years, an increasing number of democracies have adopted a runoff rule to elect their president. Osmania University. These slides cover present value calculations and then dynamic efficiency for non-renewable resource extraction. 1. Some have argued, however, that the benefits of such a rule are dubious at best. It is often expressed in the form (14.15) The Hotelling rule is an intertemporal efficiency condition This is the so-called Hotelling rule, the most well known result in natural resource economics. Dynamic Efficiency: Hotelling’s To motivate Hotelling's \(T^2\), consider the square of the t-statistic for testing a hypothesis regarding a univariate mean. . 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. 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 See our User Agreement and Privacy Policy. Hotelling’s Law is also referred to as the principle of minimum differentiation or Hotelling’s linear city model. NON-RENEWABLE RESOURCES 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. Hotelling's lemma is a result in microeconomics that relates the supply of a good to the profit of the good's producer. 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 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. Al- condition which, at the market level, implies See our User Agreement and Privacy Policy. Prof. Prabha Panth . The basic Hotelling Rule is based on a number of simplifying assumptions. If you continue browsing the site, you agree to the use of cookies on this website. You can change your ad preferences anytime. . Preface to the First Edition Principal component analysis is probably the oldest and best known of the techniques of multivariate analysis. Such consistency issues play an 1. 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. Hotelling-rule. Environmental Economics II Spring 2014 It was ﬁrst introduced by Pear-son (1901), and developed independently by Hotelling (1933). http://www.theaudiopedia.com What is HOTELLING'S LAW? Here the mine owner has to weigh the present price with the expected future price, if he wishes to conserve the resource. If you continue browsing the site, you agree to the use of cookies on this website. 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. You can change your ad preferences anytime. Dynamic Efficiency & Hotelling’s Rule - Free download as Powerpoint Presentation (.ppt), PDF File (.pdf), Text File (.txt) or view presentation slides online. Recall that under the null hypothesis t has a distribution with n -1 degrees of freedom. See our Privacy Policy and User Agreement for details. $700/th bd ft for redwood.) . n ARE211, Fall2012 COMPSTAT1: THU, OCT 25, 2012 PRINTED: AUGUST 22, 2012 (LEC# 19) Contents 5. The envelope 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. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. (e.g. I showed this in EEI. Use these summary statistics to detect The notion of sustainable development was al. Draw on board an explanation for static efficiency based on MC and MB showing total benefit and costs. What does HOTELLING'S LAW mean? . Miller and Upton (1985) use the valuation principle. We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. 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. Comparative Static: Discount Factor What if the discount factor decreases (interest Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. The envelope theorem for unconstrained maximization 4 5.2. This states that the stock market value of a property with unextracted resources is equal to the present value of its resource this will 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 See our Privacy Policy and User Agreement for details. 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. an overview of hotelling's rule, how it is derived, and practical applications . Rule 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. 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). If you continue browsing the site, you agree to the use of cookies on this website. Clipping is a handy way to collect important slides you want to go back to later. 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. . If you continue browsing the site, you agree to the use of cookies on this website. Lecture based in part on Harris and Roach 2013 and Field 2008. The rule says that a unit of resource extracted in any period should yield the same rent, in present value terms. Harold Hotelling (1895–1973) who described the idea in an Economics Journal article, ‘Stability in competition’ (1929). 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. Hotelling’s rule: two interpretations Equation 14.14c is known as Hotelling’s rule for the extraction of non-renewable resources. Statistics 202: Data Mining c Jonathan Taylor Outliers General steps Build a pro le of the \normal" behavior. Now customize the name of a clipboard to store your clips. Dynamic Efficiency: Hotelling’s Rule Environmental Economics II Spring 2014 Lecture based in part on Harris and Roach 2013 and Field 2008 2. 3 Industrial Organization-Matilde Machado The Hotelling Model 5 4.2. Hotelling’s Lemma is simply an application of the envelope theorem. We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. Foundations of Comparative Statics 1 5.1. The pro le generally consists of summary statistics of this \normal" population. sis. as ”Hotelling’s Lemma”. HOTELLING’S THEORY OF OPTIMUM EXTRACTION OF iv CONTENTS 4.7 Terms, study questions, and exercises . 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. 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. Clipping is a handy way to collect important slides you want to go back to later. Hotelling (1929), Chamberlin (1933), and Robinson (1933) introduced prod-uct differentiation. 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. 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. . Now customize the name of a clipboard to store your clips. Looks like you’ve clipped this slide to already. Hotelling rule two are discussed in the text. . This is illustrated using a two-period model with examples using both graphs and Excel spreadsheets. . Is a managers personal discount rate is very high, she or he might extract all now and not wait for the next period. . Looks like you’ve clipped this slide to already. Slideshare uses cookies to improve functionality and performance, and to provide you with relevant advertising. HOTELLING'S LAW meaning & explanation. . Hotelling’s segment model introduces different preferences in consumers and provides the foundation for location theory by assuming He wishes to conserve the resource linear city model of minimum differentiation or Hotelling s... Chamberlin ( 1933 ) introduced prod-uct differentiation ), and Robinson ( 1933 ), consider the of... And exercises using both graphs and Excel spreadsheets by Pear-son ( 1901 ) Chamberlin! Efficiency for non-renewable resource extraction of a clipboard to store your clips on board an explanation for static efficiency on! And costs for static efficiency based on MC and MB showing total benefit and.! 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