Unitization of spatially connected renewable resources
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.
We thank seminar participants at UC San Diego, Association of Environmental and Resource Economists Annual Meeting, Property and Environment Research Center, and UC Santa Barbara. Funding was provided by the Paul Allen Family Foundation. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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. citation courtesy of