Competition in Markets for Depletable Resources with Setup Costs

This paper analyzes the impact on exhaustible resource markets of setup costs, a sparsely analyzed category of nonconvex production technologies. This paper proves that, even under idealized circumstances for competition, a competitive equilibrium will fail to exist in the presence of setup costs, for any utility and cost functions such that a planner would exploit exhaustible resource pools sequentially. Copyright Springer 2005competitive equilibrium, natural resources, non-convexities, setup costs, shutdown costs,