Backstop Technology for an Exhaustible Resource: A New Look at an Old Problem

The about, 15 year old problem of the behavior of prices of an exhaustible resource when faced with a backstop technology is reworked for a more complete set of possible market outcomes. The market demand is assumed linear which further distinguishes between a competitive market and a monopoly. The analysis shades light from other angles on previous findings and brings up some fine points that were bypassed in previous research like the behavior when the cost of the backstop is below current price or even further lower, below the price at which the elasticity of demand is unity.