| Sumario: | An overlapping generations model of competitive allocations of an exhaustible resource is presented. Conditions for the existence of equilibrium extraction rules are provided, such that both extraction and investment in future stocks are increasing and continuous in the current stock. In addition, the time paths of equilibrium allocations are discussed, and it is demonstrated that there are economies where equilibrium resource extractions and prices exhibit nonclassical conduct. This is demonstrated by means of a finite horizon example in which extractions rise and prices fall over the whole time horizon and an infinite horizon example in which there are persistent cycles in extractions and prices and multiple equilibria. Finally, welfare issues are analyzed.
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