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Consider a three-period model of a nonrenewable resource extraction. Lay out the maximization problem, and determine the explicit expression for user cost. Hint: You should
Consider a three-period model of a nonrenewable resource extraction. Lay out the maximization problem, and determine the explicit expression for user cost.
Hint: You should think about what the "change in PV of NBs" would look like when there are 3 periods. You'll have a squared term in the expression, and the user cost will be based on what happens in time 1 as well as time 2.
Expressions to work from: p0-mc0=1/1+r (p1-mc1) User cost: In two time period model it is 1/1+r(p1-mc1)
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