Policy implications from agent-based models of non-renewable resource production

Whether privately or publicly held, nonrenewable resources impact social welfare and, therefore, often come under public policy purview. Those who formulate policy typically have multiple and sometimes con icting goals. Of interest to policy-makers is the relative e ectiveness of the tools at their disposal given a nonrenewable natural resource, its ownership, and the market in which it's traded. This paper extends a simple optimizing agent-based model (ABM) of a monopoly nonrenewable resource market to examine producer responses to different policy goals. Despite a simple optimization strategy, this ABM has been shown to nd pro t-maximizing production paths consistent with Hotelling's Rule in the absence of explicit costs. When costs are added, pro ts for the ABM range from zero to ten percent below optimum, depending on the cost structure and magnitude. In the present paper, costs in the form of taxes are introduced into the model. An analysis of outcomes as a function of scal regime is presented and compared with theoretical work. (JEL Q32)