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Contracts for the Management of a Non-Renewable Resource under Asymmetric Information and Structural Price Breaks

Author

Listed:
  • David Martimort
  • Jerome Pouyet
  • Francesco Ricci

Abstract

We characterize the optimal contract for resource extraction in a context where the concessionaire has private information on the initial stock of resource. The dynamics of extraction is characterized by a virtual Hotelling rule in which costs of extraction are replaced with virtual costs of extraction. We analyze how structural breaks in the price of resource impact the dynamics of extraction. JEL Codes: Q31, D82. Keywords: Non-Renewable Resource Management, Delegated Management, Optimal Contract, Asymmetric Information.

Suggested Citation

  • David Martimort & Jerome Pouyet & Francesco Ricci, 2018. "Contracts for the Management of a Non-Renewable Resource under Asymmetric Information and Structural Price Breaks," Annals of Economics and Statistics, GENES, issue 132, pages 81-103.
  • Handle: RePEc:adr:anecst:y:2018:i:132:p:81-103
    DOI: 10.15609/annaeconstat2009.132.0081
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    References listed on IDEAS

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    1. Jean-Christophe Poudou & Lionel Thomas, 2000. "Concession minière et asymétrie d'information," Économie et Prévision, Programme National Persée, vol. 143(2), pages 129-138.
    2. Christiane Baumeister & Lutz Kilian, 2016. "Forty Years of Oil Price Fluctuations: Why the Price of Oil May Still Surprise Us," Journal of Economic Perspectives, American Economic Association, vol. 30(1), pages 139-160, Winter.
    3. Christiane Baumeister & Lutz Kilian, 2016. "Understanding the Decline in the Price of Oil since June 2014," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(1), pages 131-158.
    4. Lionel Thomas & Jean-Christophe Poudou & Manh Nguyen Hung, 2006. "Optimal resource extraction contract with adverse selection," Post-Print hal-00448793, HAL.
    5. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, March.
    6. Hung, Nguyen Manh & Poudou, Jean-Christophe & Thomas, Lionel, 2006. "Optimal resource extraction contract with adverse selection," Resources Policy, Elsevier, vol. 31(2), pages 78-85, June.
    7. repec:aen:journl:eeep4_1_richardson is not listed on IDEAS
    8. David Martimort & Jérôme Pouyet & Francesco Ricci, 2018. "Extracting information or resource? The Hotelling rule revisited under asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 311-347, June.
    9. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
    10. 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.
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    13. Pindyck, Robert S, 1978. "The Optimal Exploration and Production of Nonrenewable Resources," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 841-861, October.
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    1. David Martimort & Jérôme Pouyet & Francesco Ricci, 2018. "Extracting information or resource? The Hotelling rule revisited under asymmetric information," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 311-347, June.

    More about this item

    Keywords

    Non-Renewable Resource Management; Delegated Management; Optimal Contract; Asymmetric Information.;

    JEL classification:

    • Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply; Prices
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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