Adverse selection, commitment and exhaustible resource taxation

Julie Ing ()
Additional contact information
Julie Ing: ETH Zurich, Switzerland

No 16/263, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: Governments design taxation schemes to capture resource rent. However, they usually propose contracts with limited duration and possess less information on the resources than the extractive firms do. This paper investigates how information asymmetry on costs and an inability to commit to long-term contracts affect tax revenue and the extraction path. This paper assumes that governments maximize the tax revenue contingent on the quantity extracted. This study gives several unconventional results. First, when information asymmetry exists, the inability to commit does not necessarily lower tax revenues. Second, under asymmetric information without commitment, an efficient firm may produce during the first period more or less than under symmetric information. Hence, the inability to commit has an ambiguous effect on optimal contract duration. Third, an increase in the discount factor may shift the extraction towards the first period which contradicts Hotelling's rule.

Keywords: resource taxation; asymmetric information; commitment (search for similar items in EconPapers)
JEL-codes: D86 H21 Q38 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2016-12
New Economics Papers: this item is included in nep-cta and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ethz.ch/content/dam/ethz/special-inter ... papers/WP-16-263.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not found UA (https://www.ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-263.pdf [301 Moved Permanently]--> https://ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/WP-16-263.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:16-263

Access Statistics for this paper

More papers in CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich Contact information at EDIRC.
Bibliographic data for series maintained by ().