IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v20y1989isummerp164-182.html
   My bibliography  Save this article

Asymmetric Information, Information Externalities, and Efficiency: The Case of Oil Exploration

Author

Listed:
  • Kenneth Hendricks
  • Dan Kovenock

Abstract

In this article we examine the effect of private information and information externalties on the ex post efficiency of investment in oil exploration. We show that too much drilling tends to occur if firms believe that the area is likely to contain a sizeable pool of oil, and too little drilling occurs if the opposite is true. Bargaining with well-defined property rights to the information externality can eliminate underinvestment, but overinvestment remains a problem because firms have an incentive not to disclose their private information.

Suggested Citation

  • Kenneth Hendricks & Dan Kovenock, 1989. "Asymmetric Information, Information Externalities, and Efficiency: The Case of Oil Exploration," RAND Journal of Economics, The RAND Corporation, vol. 20(2), pages 164-182, Summer.
    • Handle: RePEc:rje:randje:v:20:y:1989:i:summer:p:164-182
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0741-6261%28198922%2920%3A2%3C164%3AAIIEAE%3E2.0.CO%3B2-H&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:20:y:1989:i:summer:p:164-182. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.