“Oil field unitization”—a key provision of the regulation—enabled firms to assemble all tracts of land that shared a common access to an oil pool and to operate them as one individual unit, distributing the entire costs and benefits from the pool across all members. This regulation enabled all firms operating in a common pool to collaborate, vote on the development plan of the resource, and elect one member to be in charge of implementing the development plan. This study investigates the role of a joint venture, such as unitized tracts of land, on investment decisions. Our setup enables us to evaluate if the collaborative nature of unitized tracks fosters the adoption of new technology and state-of-the-art industry standards and, ultimately, if it results in more profitable investments.
Paul Décaire is a Ph.D. candidate in the finance department at The Wharton School.