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The investment timing game in petroleum production: An econometric model

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  • Cynthia Lin, C.-Y.

Abstract

This paper uses a structural econometric model to analyze an investment timing game that takes place during petroleum production. The model I develop enables one to estimate the structural parameters governing petroleum-producing firms’ investment timing decisions and therefore to assess the net effect of the information and extraction externalities they face. The econometric methodology presented in this paper can be employed to analyze any problem of dynamic multi-stage strategic decision-making in the presence of externalities.

Suggested Citation

  • Cynthia Lin, C.-Y., 2005. "The investment timing game in petroleum production: An econometric model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 355(1), pages 62-68.
    • Handle: RePEc:eee:phsmap:v:355:y:2005:i:1:p:62-68
    DOI: 10.1016/j.physa.2005.02.067
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    References listed on IDEAS

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    1. Ariel Pakes & Michael Ostrovsky & Steven Berry, 2007. "Simple estimators for the parameters of discrete dynamic games (with entry/exit examples)," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 373-399, June.
    2. Kenneth Hendricks & Robert H. Porter, 1993. "Determinants of the Timing and Incidence of Exploratory Drilling on Offshort Wildcat Tracts," NBER Working Papers 4605, National Bureau of Economic Research, Inc.
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