Strategic Decision-Making with Information and Extraction Externalities: A Structural Model of the MultiStage Investment Timing Game in Offshore Petroleum Production

A-Tier
Journal: Review of Economics and Statistics
Year: 2013
Volume: 95
Issue: 5
Pages: 1601-1621

Score contribution per author:

4.022 = (α=2.01 / 1 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

When individual petroleum-producing firms make their exploration and development investment timing decisions, positive information externalities and negative extraction externalities may lead them to interact strategically with their neighbors. This paper examines whether these inefficient strategic interactions take place by estimating a structural econometric model of the firms' multi-stage investment timing game. Results show that firms interact strategically on small tracts but not on large tracts. For small tracts, having a neighboring tract explored reduces real profits by about $26 million, while having a neighboring tract developed raises real profits by about $3.5 million. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Technical Details

RePEc Handle
repec:tpr:restat:v:95:y:2013:i:5:p:1601-1621
Journal Field
General
Author Count
1
Added to Database
2026-01-25