Resource Extraction, Uncertainty, and Learning

This paper analyzes resource extraction when the true size of the reserves and the future costs of extraction are uncertain. The effects of increased uncertainty are investigated under the assumption that the extraction process yields information about the variables which are uncertain at the initial planning time. Mean-stock-preserving and mean-cost-preserving increases in uncertainty affect the initial resource extraction rate differently. Mean-utility-preserving increases in uncertainty do not affect the initial rate of extraction.