On Maximin Value and Policy Functions in an Exhaustible Resource Model∗

This paper studies maximin paths in the context of a standard exhaustible resource model. Under the assumption that the resource is important in production, it establishes the efficiency and uniqueness of non-trivial maximin paths. It uses these results to study the nature of the maximin value and policy functions. The value function is shown to be differentiable with respect to the initial resource stock, and the derivative of the value function is related to the shadow prices associated with the maximin path starting from that resource stock. We show how maximin policy functions can be derived, using the maximin value function, and the fact that the maximin path always follows Hartwick’s investment rule. Journal of Economic Literature Classification Numbers: D90, O10, O41, Q32