War of attrition in the Arctic offshore: Technology spillovers and risky investments in oil and gas extraction

摘要: The Arctic offshore is an extremely difficult area for petroleum industry activity due to distance from infrastructure, harsh climate, unpredictable weather conditions, and vulnerability of the eco system. However, it also a region with great oil gas potential. A model developed in this paper studies extraction strategies two countries, Norway Russia, wanting enter offshore. are analysed through using war attrition game, where both countries play mixed strategy, i.e. they every period some probability. First, effect sources inertia, namely second-mover advantage, arising technology spillover, irreversibility investment. Both these factors found hinder entry In addition, extended include possibility spill occurring periodical reduction expected investment payoff. reduce willingness Arctic, whereas payoff increase as sooner starts, larger payoffs will be, ceteris paribus.