Divide and conquer: multiple leasing in common pool oil fields
A theoretic model is developed to analyse strategic leasing behaviours of U.S. landowners in a non-exclusively owned common oil pool. Oil field development is modelled as a simultaneous-move two-stage non-cooperative game. The landowners choose leasing strategies in the first stage; independent lease operators choose extraction strategies in the second. Ownership structure is distinguished from operation structure and their relationship analyzed. It is shown that, in a non-exclusively owned oil field, it is individually rational for a landowner to subdivide his landholding and delegate production rights to multiple independent firms, although more dispersed production control leads to heavier common pool losses.
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Volume (Year): 35 (2002)
Issue (Month): 1 (February)
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