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Factor demands and output supply by the extractive firm : theory and estimation Lasserre, Pierre

Abstract

This dissertation deals with theoretical and empirical aspects of factor demand and output supply decisions of firms. In the theoretical part of the thesis, some major existing theories of investment are discussed and their formulation is extended to the case of firms which extract an exhaustible resource. Those theories are then incorporated into a model which exploits complementarities between some of them and can reflect some well-known hypotheses, such as the putty-clay hypothesis, as special cases. This model relies on a general notion of irreversibility: a decision is defined as irreversible if it introduces a new constraint to a firm. This constraint may be a non negativity constraint, but may also mean the appearance of costs of adjustments. Such an approach implies a distinction between ex ante phases and ex post phases in the life of firms, those phases being separated by the irreversible decisions. Two empirical applications are presented. The first one corresponds to the ex ante phase of the theoretical model, and deals with the capacity selection decision of some North-American open-pit metal mines. According to the evidence, this decision takes account of economic parameters, such as expected prices, as well as geological and technological parameters. The second empirical application correspond to the ex post phase of the theoretical model, and deals with the short-run production decisions of some mines. Both empirical studies provide support for the putty-clay hypothesis.

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