2016/10/27 by Moustapha Pemy, Pemy, Moustapha
Economics, Econometrics and Finance · #Economic theories and models #Climate Change Policy and Economics
paper · pdf · doi:10.48550/arxiv.1611.02547
This paper studies the optimal extraction and taxation of nonrenewable\nnatural resources. It is well known that the market values of the main\nstrategic resources such as oil, natural gas, uranium, copper,..., etc,\nfluctuate randomly following global and seasonal macroeconomic parameters,\nthese values are modeled using Markov switching L 'evy processes. We formulate\nthis problem as a differential game. The two players of this differential game\nare the mining company whose aim is to maximize the revenues generated from its\nextracting activities and the government agency in charge of regulating and\ntaxing natural resources. We prove the existence of a Nash equilibrium. The\ncorresponding Hamilton Jacobi Isaacs equations are completely solved and the\nvalue functions as well as the optimal extraction and taxation rates are\nderived in closed-form. A Numerical example is presented to illustrate our\nfindings.\n