PUBLIC ENTERPRISES IN NATURAL RESOURCE INDUSTRIES: AN ECONOMIC ANALYSIS (URANIUM, CANADA

Public enterprises are playing an ever increasing role in natural resource industries. This research analyzes the reason for this involvement, i.e., what have been the objectives of public firms, the objectives of other firms; and the reasons behind exploration in natural resource industries.;An answer to the first question was obtained by estimating the objective function of a publicly owned uranium company operating in Saskatchewan, Canada. It was assumed the company solved a linear-quadratic optimal control problem. The conclusion was that over the period 1974-1984 the company preferred to trade-off profits for higher employment, larger reserve holdings and greater output.;The objectives of other firms in the Saskatchewan uranium industry were also investigated. It was found that producers integrated with utilities can expect to make a much greater rate of return on exploration than non-integrated producers, since the former group stands to gain both from the reduction in costs and the reduction in price resulting from exploration. This suggests that overinvestment in the Saskatchewan uranium industry may be a problem.;There are other reasons why firms invest in uranium exploration. If resource consumers are risk averse and the level of industry reserves reduces uncertainty about the cost of production, then resource demand may be influenced by exploration. The result is that a monopolistic producer has two instruments available with which to exercise market power--exploration and production. The implications of this for the level of exploration and production undertaken under a number of market structures is analyzed.;The final item investigated is the normative question of what the objective of a public firm operating alongside a private firm in an oligopolistic industry should be in order that resources in the industry are used efficiently. It was found that the answer to this question depends upon the structure of the industry and that the policy directive given the public firm has to include the objective the public firm should be maximizing as well as whether or not it should take account of the reactions of the other firms in the industry.