Extracting Common Oil: Cooperation or Competition?

Rognvaldur Hannesson

The Energy Journal, 2000, vol. 21, issue 2, 105-120

Abstract: This paper considers how likely it is that a given number of agents who share a homogeneous oil reservoir will exploit the reservoir for their common benefit. A game-theoretical model is used, examining whether one agent would profit from deviating from the cooperative strategy, given that the remaining agents would follow a subgame-perfect retaliation strategy. The paper also examines the sensitivity of the cooperative solution to the number of agents, the time it takes to discover a deviation, the value of production relative to investment, and the discount rate. It is found that the cooperative solution is very sensitive to the number of agents; with more than three agents the cooperative solution becomes very unlikely.

Keywords: Oil property rights; oil industry; oil fields; sales agreements; oil production (search for similar items in EconPapers)
Date: 2000
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Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:21:y:2000:i:2:p:105-120

DOI: 10.5547/ISSN0195-6574-EJ-Vol21-No2-5

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