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Articles (2018), RAND Journal of Economics, 49 (2), pp. 311-347

Extracting Information or Resource? The Hotelling Rule Revisited under Asymmetric Information

MARTIMORT D., POUYET Jérôme, RICCI F.

A concessionaire has private information on the initial stock of resource. A “virtual Hotelling rule” describes how the resource price evolves over time and how extraction costs are compounded with information costs along the optimal extraction path. Fields which are heterogeneous in terms of their initial stocks follow different extraction paths. Resource might be left unexploited in the long run as a way to foster incentives. The optimal contract may sometimes be implemented through royalties and license fees. With a market of concessionaires, asymmetric information leads to a “virtual Herfindahl principle” and to another form of heterogeneity across active concessionaires.

MARTIMORT, D., POUYET, J. and RICCI, F. (2018). Extracting Information or Resource? The Hotelling Rule Revisited under Asymmetric Information. RAND Journal of Economics, 49(2), pp. 311-347.