Security bonding in unconventional gas development: evidence from an economic experiment

Tiho Ancev, Danielle Merrett

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

Recent developments in drilling technology promise significant benefits from extraction of unconventional gas. At the same time, the deployment of this technology creates serious concerns about the negative effects it may have on agriculture and on the environment. This paper applies a behavioural approach to explore possibilities for improved negotiation outcomes between unconventional gas developers and host landowners using economic experiments in the laboratory. The paper specifically focuses on the role that security bond could have in resolving some of the conflicts surrounding unconventional gas development. The empirical findings from the economic experiments show that a security bond deposited by a developer prior to the commencement of the gas extraction can result with improved negotiation outcomes between developers and host landowners. Our findings suggest that the security bond is effective because it mitigates the effects of loss averse behaviour by landowners that do not hold sub-surface extraction rights.
Original languageEnglish
Pages (from-to)139-146
Number of pages8
JournalEcological Economics
Volume153
DOIs
Publication statusPublished - Nov 2018

Keywords

  • Natural resource rent
  • Security bond
  • Unconventional gas
  • Ultimatum game

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