Estimates of marginal discovery costs for oil and gas.

Previous estimates of the finding costs for oil and natural gas reserves have been impeded by the joint-cost problem in exploration. The solutions have been either to estimate the finding cost for an oil-gas aggregate or to allocate total finding costs between oil discoveries and gas discoveries according to rules chosen by the researcher. In this paper the joint-cost problem is circumvented by estimating a multiple-output, exploration cost function which is used to calculate the predicted values of marginal finding costs for oil and gas. These values are then compared with independent estimates of the shadow prices of reserves for oil and gas to help settle the debate over whether marginal finding costs provide a good measure of rent. [ABSTRACT FROM AUTHOR]