Uncertain resources , substitutes , and a theory of mutual dependence

We consider a model of resource dependence where only the seller knows the resource reserve. The model captures phenomena such as trust in the relationship and “bribing” for continuation through generous supplies. It also explains supply shocks in equilibrium: privately informed sellers have incentives to reveal their types too late through a supply disruption after which their exploit the consumers inability to immediately adjust demand. Two puzzles that a standard exhaustibleresource theory cannot explain are resolved: sellers have an incentive to overstate their resources rather than emphasize scarcity, and buyer’s can switch to alternatives before exhausting the resource thereby leaving socially valuable resource in the ground. JEL Classification: D4; D9; O33; Q40.