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Mining and Incentive Concession Contracts

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Author Info
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.laser.univ-montp1.fr/Cahiers/cahier080203.pdf
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Publisher Info
Paper provided by LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1 in its series Cahiers du LASER (LASER Working Papers) with number 2003.08.

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Length: 23 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:mop:lasrwp:2003.08

Contact details of provider:
Postal: Université de Montpellier 1, Faculté des Sciences Economiques, LASER, Av. de la Mer - Espace Richter, CS 79606, 34960 Montpellier Cedex 2, France
Web page: http://www.laser.univ-montp1.fr
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Related research
Keywords: ADVERSE SELECTION EXHAUSTIBILITY OVERPRODUCTION

Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

References listed on IDEAS
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  1. 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. [Downloadable!] (restricted)
  2. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-37, October. [Downloadable!] (restricted)
    Other versions:
  3. Jean-Jacques Laffont & Jean Tirole, 1985. "The Dynamics of Incentive Contracts," Working papers 397, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  4. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. 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.
  7. 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. [Downloadable!] (restricted)
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