IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/33067.html
   My bibliography  Save this paper

Information Externalities, Free Riding, and Optimal Exploration in the UK Oil Industry

Author

Listed:
  • Charles Hodgson

Abstract

Information spillovers between firms can reduce R&D incentives if competitors can free ride on innovations. However, strong property rights may impede cumulative research and lead to inefficient duplication. These effects are particularly relevant in natural resource exploration, where discoveries are spatially correlated. Using UK offshore oil exploration data, I estimate a dynamic model that captures the trade-off between drilling now and waiting to learn from competitors. Removing free-riding incentives increases industry surplus by 52%, while perfect information flow raises it by 24%. Counterfactual policy simulations highlight a trade-off in property rights design: stronger property rights over exploration well data increase the rate of exploration, while weaker property rights increase the efficiency and speed of learning but reduce the rate of exploration. Spatial clustering of each firm's drilling licenses both reduces the incentive to free ride and increases the speed of learning.

Suggested Citation

  • Charles Hodgson, 2024. "Information Externalities, Free Riding, and Optimal Exploration in the UK Oil Industry," NBER Working Papers 33067, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33067
    Note: IO
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w33067.pdf
    Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:33067. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.