Unitization of Spatially Connected Renewable Resources

36 Pages Posted: 7 Sep 2010 Last revised: 25 Mar 2015

See all articles by Daniel Kaffine

Daniel Kaffine

University of California, Santa Barbara (UCSB) - Department of Economics

Christopher Costello

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management

Date Written: September 2010

Abstract

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.

Suggested Citation

Kaffine, Daniel and Costello, Christopher, Unitization of Spatially Connected Renewable Resources (September 2010). NBER Working Paper No. w16338. Available at SSRN: https://ssrn.com/abstract=1672590

Daniel Kaffine (Contact Author)

University of California, Santa Barbara (UCSB) - Department of Economics ( email )

2127 North Hall
Santa Barbara, CA 93106
United States

Christopher Costello

University of California, Santa Barbara (UCSB) - Donald Bren School of Environmental Science & Management ( email )

4670 Physical Sciences North
Santa Barbara, CA 93106-5131
United States
(805) 893-5802 (Phone)
(805) 893-7612 (Fax)

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