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Exploration Versus Extraction Costs as Determinants of Optimal Mineral‐Rights Leases *
Author(s) -
HYDE ROBERT,
MARKUSEN JAMES R.
Publication year - 1982
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1982.tb00370.x
Subject(s) - government (linguistics) , production (economics) , natural resource economics , microeconomics , public good , business , risk aversion (psychology) , economics , environmental economics , industrial organization , public economics , financial economics , expected utility hypothesis , philosophy , linguistics
Leasing agreements concerning the exploitation of mineral deposits on government lands are analyzed with a special emphasis on the distinction between exploration and extraction activities. Results include a demonstration that the conditions for the optimal sharing of exploration costs are closely related to the conditions for the optimal pricing of public goods. Other results include a demonstration of how the sharing of exploration costs relative to the sharing of production costs is affected by asymmetries in information as well as by differences in risk aversion.