Abstract
Exploration for an exhaustible natural resource is valuable because it produces information about the resource stock. I model a duopoly-exhaustible resource industry with imperfect information about stock size as a two-period game, where each period is made up of an exploration stage and an extraction stage. I derive the value of gaining information about stock size prior to committing to an extraction plan both for the exploring firm and for the rival. I show that an exploring firm would prefer, on average, to keep exploration information private, but that industry profit is higher when information is made public.
Original language | English (US) |
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Pages (from-to) | 473-492 |
Number of pages | 20 |
Journal | Canadian Journal of Economics |
Volume | 29 |
Issue number | 2 |
DOIs | |
State | Published - May 1996 |