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Divide and conquer: multiple leasing in common pool oil fields

Author

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  • Lasheng Yuan

Abstract

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.

Suggested Citation

  • Lasheng Yuan, 2002. "Divide and conquer: multiple leasing in common pool oil fields," Canadian Journal of Economics, Canadian Economics Association, vol. 35(1), pages 36-51, February.
  • Handle: RePEc:cje:issued:v:35:y:2002:i:1:p:36-51
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    Cited by:

    1. Boyce, John R. & Nøstbakken, Linda, 2011. "Exploration and development of U.S. oil and gas fields, 1955-2002," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 891-908, June.
    2. Martzoukos, Spiros H. & Zacharias, Eleftherios, 2013. "Real option games with R&D and learning spillovers," Omega, Elsevier, vol. 41(2), pages 236-249.

    More about this item

    JEL classification:

    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land

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