Working Paper: NBER ID: w13320
Authors: Boyan Jovanovic
Abstract: Aside from the equilibrium that Hotelling (1931) displayed, his model of non-renewable resources also contains a continuum of bubble equilibria. In all the equilibria the price of the resource rises at the rate of interest. In a bubble equilibrium, however, the consumption of the resource peters out, and a positive fraction of the original stock continues to trade forever. And that may well be happening in the market for high-end Bordeaux wines.
Keywords: bubbles; exhaustible resources; vintage wines
JEL Codes: E44; G12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trading frequency (G14) | consumption rates (E21) |
| bubble equilibrium (D50) | consumption of wine (L66) |
| bubble equilibrium (D50) | trading of wine (L66) |
| trading of wine (L66) | price increase (D49) |
| low consumption rates (E21) | trading of wine (L66) |