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Unitization of spatially connected renewable resources

Listed author(s):
  • Daniel T. Kaffine
  • Christopher J. Costello

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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File URL: http://www.nber.org/papers/w16338.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16338.

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Date of creation: Sep 2010
Publication status: published as Kaffine Daniel T & Costello Christopher, 2011. "Unitization of Spatially Connected Renewable Resources," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-31, March.
Handle: RePEc:nbr:nberwo:16338
Note: EEE
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  1. 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.
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  9. 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.
  10. 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.
  11. Janmaat, Johannus A., 2005. "Sharing clams: tragedy of an incomplete commons," Journal of Environmental Economics and Management, Elsevier, vol. 49(1), pages 26-51, January.
  12. Sanchirico, James N. & Wilen, James E., 2001. "A Bioeconomic Model of Marine Reserve Creation," Journal of Environmental Economics and Management, Elsevier, vol. 42(3), pages 257-276, November.
  13. 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.
  14. 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.
  15. 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.
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  17. 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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