Unitization of Spatially Connected Renewable Resources
36 Pages Posted: 7 Sep 2010 Last revised: 25 Mar 2015
Date Written: September 2010
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.
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