Exploration Versus Extraction Costs as Determinants of Optimal Mineral‐Rights Leases

Robert Hyde and James Markusen

The Economic Record, 1982, vol. 58, issue 3, 224-234

Abstract: Leasing agreements concerning the exploitation of mineral deposits on government lands are analyzed with a special emphasis on the distinction between exploration and extraction activities. Results include a demonstration that the conditions for the optimal sharing of exploration costs are closely related to the conditions for the optimal pricing of public goods. Other results include a demonstration of how the sharing of exploration costs relative to the sharing of production costs is affected by asymmetries in information as well as by differences in risk aversion.

Date: 1982
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