Optimal Contracts for Exploration with Cost Recovery of an Exhaustible Natural Resource Under Asymmetric Information

Uddin Helal and Shaikh Mahfuzur Rahman

No 28578, Working Papers from University of Maryland, Department of Agricultural and Resource Economics

Abstract: Exploration of an exhaustible resource with cost recovery under asymmetric information about cost is modeled and analyzed employing Principal-Agent theory. Allocation of lower than full information level of effort for the high-cost firms is found socially optimal. However, distortion is less in a two-stage process of exploration and extraction.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 18
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ags:umdrwp:28578

DOI: 10.22004/ag.econ.28578

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