Competition and unitization in oil extraction : a tale of two tragedies

Mohan, Vijay and Goorha, Prateek 2008, Competition and unitization in oil extraction : a tale of two tragedies, Review of law and economics, vol. 4, no. 1, pp. 519-561, doi: 10.2202/1555-5879.1264.

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Title Competition and unitization in oil extraction : a tale of two tragedies
Author(s) Mohan, Vijay
Goorha, Prateek
Journal name Review of law and economics
Volume number 4
Issue number 1
Start page 519
End page 561
Publisher Berkeley Electronic Press
Place of publication Berkeley, Calif.
Publication date 2008-12-28
ISSN 1555-5879
Keyword(s) petroleum industry & trade
business models
right of property unit operation of oil fields
Summary This paper compares two organizational modes for extracting oil from a common pool: unitization and competitive extraction. The analysis suggests that the general presumption that unitization is surplus enhancing relative to competitive extraction may not always be valid due to contractual incompleteness associated with unitization contracts. While competitive extraction suffers from the tragedy of the commons, unitization can be subject to the dual tragedy of the anticommons. This provides an explanation for the puzzle confronting the oil industry that firms are often reluctant to voluntarily enter unitization agreements.
Language eng
DOI 10.2202/1555-5879.1264
Field of Research 140209 Industry Economics and Industrial Organisation
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2008 by bepress
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Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Business School
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