Abstract
In their paper, L-L claim that a competitive industry will effect the same optimal depletion decisions as a social welfare maximizing central planner. Critical to their analysis, however, is the assumption that each firm in the competitive industry has exclusive property rights over the resource. But to repeat, property rights arrangements over natural resources such as oil and natural gas do not convey exclusive rights. Therefore, the competitive industry is bound to make suboptimal dynamic production decisions. Hence, from society's point of view, the choice between a monopoly or competitive industry in the provision of an exhaustible resource is not unambiguous and the ramifications for regulation are complex.
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