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