Optimal resource extraction contract with adverse selection

This paper studies the design of a mining concession contract as a multi-period adverse selection problem where production is the depletion of a non renewable resource. Compared with symmetric information, we show that overproduction is optimal in the terminal phase of the resource extraction progra...

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Bibliographic Details
Published in:Resources policy 2006-06, Vol.31 (2), p.78-85
Main Authors: Hung, Nguyen Manh, Poudou, Jean-Christophe, Thomas, Lionel
Format: Article
Language:English
Subjects:
Adverse selection
Exhaustibility
Information
Knowledge
Non-renewable resources
Overproduction
Resource utilization
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Summary:This paper studies the design of a mining concession contract as a multi-period adverse selection problem where production is the depletion of a non renewable resource. Compared with symmetric information, we show that overproduction is optimal in the terminal phase of the resource extraction program. Moreover, asymmetric information lengthens the contract duration but reduces the scarcity rent.
ISSN:0301-4207
1873-7641
DOI:10.1016/j.resourpol.2006.07.001