How does OPEC allocate quotas?

Abstract

Since 1982, members of the Organization of Petroleum Exporting Countries (OPEC) have frequently agreed upon an overall oil production ceiling and individual production quotas. Nonetheless, OPEC has never adopted a published, explicit formula for allocating those quotas. While quotas were seemingly allocated on an ad hoc basis, it is discernible that taken together, the allocations display remarkable consistency. This article attempts to demystify this question by modeling and testing OPEC's quota allocation behavior. While all the proposed models appear to be supported by the results, the authors prefer the simplest formulations.