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Extracting Common Oil: Cooperation or Competition?

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  • Rognvaldur Hannesson

Abstract

This paper considers how likely it is that a given number of agents who share a homogeneous oil reservoir will exploit the reservoir for their common benefit. A game-theoretical model is used, examining whether one agent would profit from deviating from the cooperative strategy, given that the remaining agents would follow a subgame-perfect retaliation strategy. The paper also, examines the sensitivity of the cooperative solution to the number of agents, the, time it takes to discover a deviation, the value of production relative to, investment, and the discount rate. It isf ound that the cooperative solution is very sensitive to the number of agents; with more than three agents the cooperative solution becomes very unlikely.

Suggested Citation

  • Rognvaldur Hannesson, 2000. "Extracting Common Oil: Cooperation or Competition?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 105-120.
    • Handle: RePEc:aen:journl:2000v21-02-a05
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    Cited by:

    1. Abdul-Salam, Yakubu & Kemp, Alex & Phimister, Euan, 2021. "Unlocking the economic viability of marginal UKCS discoveries: Optimising cluster developments," Energy Economics, Elsevier, vol. 97(C).

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    JEL classification:

    • F0 - International Economics - - General

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