Firms producing from a single oilfield face the common-pool problem: how to divide production and profits among themselves. The rule of capture creates competition am ong them to produce the oil before anyone else does and a tendency fo r overproduction. Private bargaining among the firms can avoid the wa steful production practices associated with the rule of capture and i ncrease joint profits. This paper explores the structure and expected outcome of the common-pool problem, and demonstrates that smaller pr oducers hold a bargaining advantage that is not easily overcome by la rger producers or neutral arbitrators. Copyright 1987 by Oxford University Press.
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Article provided by Oxford University Press in its journal Economic Inquiry.
Volume (Year): 25 (1987) Issue (Month): 4 (October) Pages: 631-44 Download reference. The following formats are available: HTML
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Handle: RePEc:oup:ecinqu:v:25:y:1987:i:4:p:631-44
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