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Exploration Versus Extraction Costs as Determinants of Optimal Mineral‐Rights Leases

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  • ROBERT HYDE
  • JAMES R. MARKUSEN

Abstract

Leasing agreements concerning the exploitation of mineral deposits on government lands are analyzed with a special emphasis on the distinction between exploration and extraction activities. Results include a demonstration that the conditions for the optimal sharing of exploration costs are closely related to the conditions for the optimal pricing of public goods. Other results include a demonstration of how the sharing of exploration costs relative to the sharing of production costs is affected by asymmetries in information as well as by differences in risk aversion.

Suggested Citation

  • Robert Hyde & James R. Markusen, 1982. "Exploration Versus Extraction Costs as Determinants of Optimal Mineral‐Rights Leases," The Economic Record, The Economic Society of Australia, vol. 58(3), pages 224-234, September.
    • Handle: RePEc:bla:ecorec:v:58:y:1982:i:3:p:224-234
    DOI: 10.1111/j.1475-4932.1982.tb00370.x
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    References listed on IDEAS

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    1. Douglas K. Reece, 1978. "Competitive Bidding for Offshore Petroleum Leases," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 369-384, Autumn.
    2. Kemp, Alexander G, 1975. "Fiscal Policy and the Profitability of North Sea Oil Exploitation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 22(3), pages 237-260, November.
    3. James R. Markusen, 1975. "Efficiency Aspects of Profit-Sharing Systems versus Wage Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(4), pages 601-612.
    4. James R. Markusen, 1979. "Personal and Job Characteristics as Determinants of Employee-Firm Contract Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(2), pages 255-279.
    5. Earl O. Heady, 1947. "Economics of Farm Leasing Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 659-678.
    6. Sumner, M T, 1978. "Progressive Taxation of Natural Resource Rents," The Manchester School of Economic & Social Studies, University of Manchester, vol. 46(1), pages 1-16, March.
    7. Garnaut, Ross & Clunies Ross, Anthony, 1975. "Uncertainty, Risk Aversion and the Taxing of Natural Resource Projects," Economic Journal, Royal Economic Society, vol. 85(338), pages 272-287, June.
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    9. Sandmo, Agnar, 1972. "Optimality rules for the provision of collective factors of production," Journal of Public Economics, Elsevier, vol. 1(1), pages 149-157, April.
    10. Hayne E. Leland, 1978. "Optimal Risk Sharing and the Leasing of Natural Resources, with Application to Oil and Gas Leasing on the OCS," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 92(3), pages 413-437.
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    Cited by:

    1. Fraser, Robert W, 1986. "On the Relationship between Exploration and Extraction," Australian Economic Papers, Wiley Blackwell, vol. 25(46), pages 135-143, June.
    2. Smith, James L., 2014. "A parsimonious model of tax avoidance and distortions in petroleum exploration and development," Energy Economics, Elsevier, vol. 43(C), pages 140-157.
    3. Smith, James L., 2013. "Issues in extractive resource taxation: A review of research methods and models," Resources Policy, Elsevier, vol. 38(3), pages 320-331.
    4. Mr. James L. Smith, 2012. "Modeling the Impact of Taxes on Petroleum Exploration and Development," IMF Working Papers 2012/278, International Monetary Fund.

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