Unitization of spatially connected renewable resources
NBER Working Paper No. 16338
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.
Published: Kaffine Daniel T & Costello Christopher, 2011. "Unitization of Spatially Connected Renewable Resources," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-31, March.