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Unitization of Spatially Connected Renewable Resources

Listed author(s):
  • Kaffine Daniel T

    ()

    (Colorado School of Mines)

  • Costello Christopher

    ()

    (University of California, Santa Barbara)

Spatial connectivity of renewable resources induces a spatial externality in extraction. We explore the consequences of decentralized spatial property rights in the presence of spatial externalities. We generalize the notion of unitization—developed to enhance cooperative extraction of oil and gas fields—and apply it to renewable resources which face a similar spatial commons problem. We find that unitizing a common pool renewable resource can yield first-best outcomes even when participation is voluntary, provided profit sharing rules can vary by participant.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 11 (2011)
Issue (Month): 1 (March)
Pages: 1-31

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Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:15
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References listed on IDEAS
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  1. Libecap, Gary D & Wiggins, Steven N, 1984. "Contractual Responses to the Common Pool: Prorationing of Crude Oil Production," American Economic Review, American Economic Association, vol. 74(1), pages 87-98, March.
  2. Heintzelman, Martin D. & Salant, Stephen W. & Schott, Stephan, 2009. "Putting free-riding to work: A Partnership Solution to the common-property problem," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 309-320, May.
  3. Bhat, Mahadev G. & Huffaker, Ray G., 2007. "Management of a transboundary wildlife population: A self-enforcing cooperative agreement with renegotiation and variable transfer payments," Journal of Environmental Economics and Management, Elsevier, vol. 53(1), pages 54-67, January.
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  9. Stephan Schott & Neil Buckley & Stuart Mestelman & R. Muller, 2007. "Output sharing in partnerships as a common pool resource management instrument," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 37(4), pages 697-711, August.
  10. Costello, Christopher J. & Kaffine, Daniel, 2008. "Natural resource use with limited-tenure property rights," Journal of Environmental Economics and Management, Elsevier, vol. 55(1), pages 20-36, January.
  11. Libecap, Gary D & Wiggins, Steven N, 1985. "The Influence of Private Contractual Failure on Regulation: The Case of Oil Field Unitization," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 690-714, August.
  12. McWhinnie, Stephanie F., 2009. "The tragedy of the commons in international fisheries: An empirical examination," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 321-333, May.
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  14. David Levhari & Leonard J. Mirman, 1980. "The Great Fish War: An Example Using a Dynamic Cournot-Nash Solution," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 322-334, Spring.
  15. Sanchirico, James N. & Wilen, James E., 1999. "Bioeconomics of Spatial Exploitation in a Patchy Environment," Journal of Environmental Economics and Management, Elsevier, vol. 37(2), pages 129-150, March.
  16. Sanchirico, James & Wilen, James, 2000. "The Impacts of Marine Reserves on Limited-Entry Fisheries," Discussion Papers dp-00-34, Resources For the Future.
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