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Exploration and Extraction in a Duopoly-Exhaustible Resource Market

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  • Stephen Polasky

Abstract

Exploration for an exhaustible natural resource is valuable because it produces information about the resource stock. The author models a duopoly-exhaustible resource industry with imperfect information about stock size as a two-period game, where each period is made up of an exploration stage and an extraction stage. He derives the value of gaining information about stock size prior to committing to an extraction plan both for the exploring firm and for the rival. The author shows that an exploring firm would prefer, on average, to keep exploration information private but that industry profit is higher when information is made public.

Suggested Citation

  • Stephen Polasky, 1996. "Exploration and Extraction in a Duopoly-Exhaustible Resource Market," Canadian Journal of Economics, Canadian Economics Association, vol. 29(2), pages 473-492, May.
    • Handle: RePEc:cje:issued:v:29:y:1996:i:2:p:473-92
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    Citations

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    Cited by:

    1. Luca Lambertini, 2014. "Exploration For Nonrenewable Resources In A Dynamic Oligopoly: An Arrovian Result," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 16(02), pages 1-11.
    2. John Lynham, 2017. "Identifying Peer Effects Using Gold Rushers," Land Economics, University of Wisconsin Press, vol. 93(3), pages 527-548.
    3. Benchekroun, Hassan & Breton, Michèle & Chaudhuri, Amrita Ray, 2019. "Mergers in nonrenewable resource oligopolies and environmental policies," European Economic Review, Elsevier, vol. 111(C), pages 35-52.
    4. Morita, Tamaki & Higashida, Keisaku & Takarada, Yasuhiro & Managi, Shunsuke, 2018. "Does acquisition of mineral resources by firms in resource-importing countries reduce resource prices?," Resources Policy, Elsevier, vol. 58(C), pages 97-110.
    5. Boyce, John R. & Vojtassak, Lucia, 2008. "An 'oil'igopoly theory of exploration," Resource and Energy Economics, Elsevier, vol. 30(3), pages 428-454, August.
    6. Polasky, Stephen & Bin, Okmyung, 2001. "Entry Deterrence and Signaling in a Nonrenewable Resource Model," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 235-256, November.
    7. HIGASHIDA Keisaku, 2013. "Acquisition of Mines by Resource-importing Firms and Distribution of Profits from Resource Extraction," Discussion papers 13074, Research Institute of Economy, Trade and Industry (RIETI).
    8. Keisaku Higashida & Yasuhiro Takarada, 2012. "Does the Acquisition of Mines Benefit Resource-Importing Countries?," Discussion Paper Series 86, School of Economics, Kwansei Gakuin University, revised Mar 2012.

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