Question

compare the two models of optimal deplation ( Hotteling and Gray) in terms of their respective...

compare the two models of optimal deplation ( Hotteling and Gray) in terms of their respective trends in : Rent ?

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Answer #1

According to Gray, an innovative theory regarding margin of production was emerged. As per that theory, the rent earned from a mine have two components. They are return earned through the used mineral part and return earned by way of site value of land. Whereas, here, the mine located in the margin of production will not earn any kind of royalty and he says that those who cannot earn royalty cannot earn rent also. So , no capitalized value and royalty.

On the other side, hotteling rent means the maximum amount of rent received while dispose the stock resource. It can be also called as scarcity rent. This rent occurs from a condition in which the owner of the resource have freedom to access the resource for free. This rent will be the royalty of the resource. Such resource rent includes both renewable as well as biological resources.

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