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This is about Investment, time and future discounting Suppose that the market for oil is competitive, and it opens today and one year from now

This is about Investment, time and future discounting

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Suppose that the market for oil is competitive, and it opens today and one year from now (any oil that is not sold in the market that opens one year from now will be thrown away). The inverse demand for oil in each market is equal to p = i for some a > 0, where (.1 denotes the quantity of oil, and the demand function is the same for today and one year from now. Each supplier of oil owns an oil well that holds a xed amount of oil. The marginal cost of oil production is constant and equal to c. Let 1" denote the annual interest rate, and there is no ination or uncertainty. Assume further that all suppliers of oil perfectly predict the market clearing price of oil today and one year from now. Let p1 and p2 denote the price of oil today and one year from now. If strictly positive amount of oil is demanded and supplied in both markets, then what is the relationship between the markup today (i.e., plc_C) and one year from now (i.e., pQgc)

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