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Mining and Incentive Concession Contracts

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  • Hung, N.-M
  • Poudou, J.-C.
  • Thomas, L.
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    Abstract

    This paper studies the design of a mining concession contract as a multi-period autoselection problem where production is the depletion of a non renewable resource. As compared to symmetric information, we show that overproduction (resp. underproduction) is optimal in the initial phase (resp. terminal phase ) of the resource extraction program. Also, asymmetric information lengthens the contract duration but reduces the scarcity rent. Finally, when there are several agents competing for contract bid, we show that optimal auctioning could be used to award the concession, assigning the lowest cost agent to carry out the extraction.

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    File URL: http://www.creden.univ-montp1.fr/downloads/cahiers/CC-03-10-38.pdf
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    Bibliographic Info

    Paper provided by CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1 in its series Cahiers du CREDEN (CREDEN Working Papers) with number 03.10.38.

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    Length: 21 pages
    Date of creation: 2003
    Date of revision:
    Handle: RePEc:mop:credwp:03.10.38

    Contact details of provider:
    Postal: Université de Montpellier 1, Faculté des Sciences Economiques, CREDEN, Rue Raymond Dugrand - Espace Richter, CS 79606, 34960 Montpellier Cedex 2, France
    Phone: 33 (0)4 67 15 83 60
    Fax: 33 (0)4 67 15 84 04
    Web page: http://www.creden.univ-montp1.fr
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    Related research

    Keywords: ADVERSE SELECTION; EXHAUSTIBILITY; OVERPRODUCTION;

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    References

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    1. Petter Osmundsen, 1998. "Dynamic Taxation of Non-renewable Natural Resources Under Asymmetric Information About Reserves," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 933-951, November.
    2. Jean-Jaques Laffont & Jean Tirole, 1985. "Auctioning Incentive Contracts," Working papers 403, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Livernois, John R & Uhler, Russell S, 1987. "Extraction Costs and the Economics of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 195-203, February.
    4. David Levhari & Nissan Liviatan, 1977. "Notes on Hotelling's Economics of Exhaustible Resources," Canadian Journal of Economics, Canadian Economics Association, vol. 10(2), pages 177-92, May.
    5. Gaudet, Gerard & Lassere, Pierre & Long, Ngo Van, 1995. "Optimal Resource Royalties with Unknown and Temporally Independent Extraction Cost Structures," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 715-49, August.
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