Petroleum Price Controls When Information Is a Joint Product

Abstract

When price controls alter the production schedule from one crude oil property, they can indirectly alter production decisions at other properties not subject to controls, even if the two properties are not related by physical production or demand effects. This occurs if (i) the property under price controls produces information as a joint product, (ii) there is a jointness of information between the properties, and (iii) the existence of fixed costs of beginning development on the non-controlled property allows the availability of information to affect total equilibrium conditions.