The investment timing game in petroleum production: An econometric model

Abstract

This paper uses a structural econometric model to analyze an investment timing game that takes place during petroleum production. The model I develop enables one to estimate the structural parameters governing petroleum-producing firms’ investment timing decisions and therefore to assess the net effect of the information and extraction externalities they face. The econometric methodology presented in this paper can be employed to analyze any problem of dynamic multi-stage strategic decision-making in the presence of externalities.