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Unitization of Spatially Connected Renewable Resources

Daniel Kaffine and Costello Christopher ()
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Costello Christopher: University of California, Santa Barbara

The B.E. Journal of Economic Analysis & Policy, 2011, vol. 11, issue 1, 1-31

Abstract: 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.

Date: 2011
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Working Paper: Unitization of spatially connected renewable resources (2010) Downloads
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DOI: 10.2202/1935-1682.2714

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