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Optimal Resource Royalties with Unknown and Temporally Independent Extraction Cost Structures

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Author Info
Gaudet, Gerard
Lassere, Pierre
Long, Ngo Van

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Abstract

The authors study optimal nonrenewable resource royalty contracts when the extracting agent has private information on costs. This is a dynamic incentive problem in which the repeated relationship between the principal and the agent is constrained by initial reserves. Commitment is limited to one period and costs are intertemporally independent. Compared with full information extraction, information asymmetry shifts production to the future when the optimal contract requires exhaustion in two periods. When exhaustion by all types in two periods is not warranted, the effect on the terminal period is ambiguous and the output of even the lowest cost firm is always distorted. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 36 (1995)
Issue (Month): 3 (August)
Pages: 715-49
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Handle: RePEc:ier:iecrev:v:36:y:1995:i:3:p:715-49

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  1. Helal, Uddin & Rahman, Shaikh Mahfuzur, 2006. "Optimal Contracts for Exploration with Cost Recovery of an Exhaustible Natural Resource Under Asymmetric Information," Working Papers 28578, University of Maryland, Department of Agricultural and Resource Economics. [Downloadable!]
  2. Rahman, Shaikh Mahfuzur & Helal, Uddin, 2004. "Optimal Contracts For Exploration With Cost Recovery Of An Exhaustible Natural Resource Under Asymmetric Information," 2004 Annual meeting, August 1-4, Denver, CO 20180, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  3. Hung, N.M. & Poudou, J.-C. & Thomas, L., 2003. "Mining and Incentive Concession Contracts," Cahiers du LASER (LASER Working Papers) 2003.08, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1. [Downloadable!]
  4. Osmundsen, Petter, 2009. "Time consistency in Petroleum Taxation - The case of Norway," UiS Working Papers in Economics and Finance 2009/18, University of Stavanger. [Downloadable!]
  5. Gérard Gaudet & Pierre Lasserre & Ngo Van Long, 1995. "Dynamic Incentive Contracts with Uncorrelated Private Information and History Dependent Outcomes," CIRANO Working Papers 95s-37, CIRANO. [Downloadable!]
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  6. repec:mop:credwp:03.10.38 is not listed on IDEAS
  7. Hassan Benchekroun & Ngo Van Long, 1997. "Efficiency Inducing Taxation for Polluting Oligopolists," CIRANO Working Papers 97s-21, CIRANO. [Downloadable!]
    Other versions:
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