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Information asymmetry, trade, and drilling: evidence from an oil lease lottery
Author(s) -
Brehm Paul A.,
Lewis Eric
Publication year - 2021
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12381
Subject(s) - lease , lottery , exploit , production (economics) , information asymmetry , government (linguistics) , business , drilling , economics , industrial organization , natural resource economics , microeconomics , finance , engineering , computer science , mechanical engineering , linguistics , philosophy , computer security
We exploit a government oil lease lottery that randomly assigned leases to individuals and firms. We examine how initial misallocation affected trade, drilling, and production outcomes. When parcels are far from existing production, leases won by individuals have similar drilling and production outcomes as those won by firms. However, for parcels close to existing production, we find that leases are about 50% less likely to be drilled when they are won by firms. We find evidence that information asymmetries drive these results.