First-movers, non-movers, and social gains from subsidising entry in markets for nature-based recreational goods
AbstractThe importance of ecosystem services for mankind stresses the issue of identifying different institutional solutions to effectively secure their adequate provision. Much focus has been on services of the public good type, and instruments like payments for environmental services. We extend this work to consider the possible social gains from supporting development of new markets for nature-based recreational goods, which may alleviate negative externalities caused by congestion problems. Our three main questions are: i) Why is there a lack of market development? ii) Can there be social gains from intervention and supporting the development of such markets? And iii) if so, then how could such intervention be best performed? We use a two-stage non-cooperative Bayesian simultaneous-move game model and show that in spite of apparent potential first-mover advantages in a developing market, demand uncertainty and sunk costs may equally well result in widespread presence of non-movers on the supplier side. We show that social gains can be made from offering a subsidy towards the sunk costs. Analysing three possible subsidy schemes, we show a) that fixed costs may make rationing optimal, b) that sequential rationing does not necessarily dominate strict rationing because c) the more subsidies are offered, the larger each subsidy must be to induce participation, and that d) the longer a single agent on the market may keep market information to himself, the better a non-rationing scheme will perform relative to rationing schemes. Finally, e) subsidies for second-mover entry may be optimal in some cases.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Ecological Economics.
Volume (Year): 68 (2009)
Issue (Month): 8-9 (June)
Contact details of provider:
Web page: http://www.elsevier.com/locate/ecolecon
Sunk costs Fixed supply Public procurement Rationing Payment for environmental services Ecosystem services;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fisher, Brendan & Turner, R. Kerry & Morling, Paul, 2009. "Defining and classifying ecosystem services for decision making," Ecological Economics, Elsevier, vol. 68(3), pages 643-653, January.
- Reinganum, Jennifer F., 1981.
"Dynamic games of innovation,"
Journal of Economic Theory,
Elsevier, vol. 25(1), pages 21-41, August.
- Schmalensee, Richard, 1982.
"Product Differentiation Advantages of Pioneering Brands,"
American Economic Review,
American Economic Association, vol. 72(3), pages 349-65, June.
- Schmalensee, Richard., 1980. "Product differentiation advantages of pioneering brands," Working papers 1140-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Merlo, Maurizio & Milocco, Erica & Panting, Richard & Virgilietti, Paola, 2000. "Transformation of environmental recreational goods and services provided by forestry into recreational environmental products," Forest Policy and Economics, Elsevier, vol. 1(2), pages 127-138, August.
- Reinganum, Jennifer F, 1983.
"Uncertain Innovation and the Persistence of Monopoly,"
American Economic Review,
American Economic Association, vol. 73(4), pages 741-48, September.
- Reinganum, Jennifer R., 1982. "Uncertain Innovation and the Persistence of Monopoly," Working Papers 431, California Institute of Technology, Division of the Humanities and Social Sciences.
- Klemperer, Paul, 1999.
" Auction Theory: A Guide to the Literature,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 13(3), pages 227-86, July.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
- Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
- Klemperer, Paul, 1999. "Auction Theory: a Guide to the Literature," CEPR Discussion Papers 2163, C.E.P.R. Discussion Papers.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
- de Groot, Rudolf S. & Wilson, Matthew A. & Boumans, Roelof M. J., 2002. "A typology for the classification, description and valuation of ecosystem functions, goods and services," Ecological Economics, Elsevier, vol. 41(3), pages 393-408, June.
- Signe ANTHON & Peter BOGETOFT & Bo Jellesmark THORSEN, 2007. "A Bureaucrat'S Procurement Strategy: Budget Constraints And Rationing," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(2), pages 221-244, 06.
- Kaplan, Todd R. & Luski, Israel & Wettstein, David, 2003.
"Innovative activity and sunk cost,"
International Journal of Industrial Organization,
Elsevier, vol. 21(8), pages 1111-1133, October.
- Vail, David & Heldt, Tobias, 2004. "Governing snowmobilers in multiple-use landscapes: Swedish and Maine (USA) cases," Ecological Economics, Elsevier, vol. 48(4), pages 469-483, April.
- C.C. von Weizsaker, 1980. "A Welfare Analysis of Barriers to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 399-420, Autumn.
- Franz Hackl & Martin Halla & Gerald J. Pruckner, 2007. "Local compensation payments for agri-environmental externalities: a panel data analysis of bargaining outcomes," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(3), pages 295-320, September.
- repec:ebl:ecbull:v:12:y:2002:i:1:p:1-6 is not listed on IDEAS
- Rob Hart, 2005. "Combating moral hazard in agri-environmental schemes: a multiple-agent approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(1), pages 75-91, March.
- J.J.J. Thijssen & K.J.M. Huisman & P.M. Kort, 2003.
"The Effects of Information on Strategic Investment and Welfare,"
Trinity Economics Papers
200310, Trinity College Dublin, Department of Economics.
- Jacco Thijssen & Kuno Huisman & Peter Kort, 2006. "The effects of information on strategic investment and welfare," Economic Theory, Springer, vol. 28(2), pages 399-424, 06.
- Mathias Dewatripont & Patrick Bolton, 2005.
ULB Institutional Repository
2013/9543, ULB -- Universite Libre de Bruxelles.
- Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, October.
- Mantau, Udo & Mertens, Berthold & Welcker, Borris & Malzburg, Birgit, 2001. "Risks and chances to market recreational and environmental goods and services -- experience from 100 case studies," Forest Policy and Economics, Elsevier, vol. 3(1-2), pages 45-53, September.
- Uwe Latacz-Lohmann & Carel P. C. M. Hamsvoort, 1998. "Auctions as a Means of Creating a Market for Public Goods from Agriculture," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(3), pages 334-345.
- Signe Anthon & Bo Jellesmark Thorsen, 2004. "Optimal Afforestation Contracts with Asymmetric information on Private Environmental Benefits," Working Papers 2004.46, Fondazione Eni Enrico Mattei.
- McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November.
- Vail, David & Hultkrantz, Lars, 2000. "Property rights and sustainable nature tourism: adaptation and mal-adaptation in Dalarna (Sweden) and Maine (USA)," Ecological Economics, Elsevier, vol. 35(2), pages 223-242, November.
- Paavola, Jouni, 2007. "Institutions and environmental governance: A reconceptualization," Ecological Economics, Elsevier, vol. 63(1), pages 93-103, June.
- Turner, R. Kerry & Paavola, Jouni & Cooper, Philip & Farber, Stephen & Jessamy, Valma & Georgiou, Stavros, 2003. "Valuing nature: lessons learned and future research directions," Ecological Economics, Elsevier, vol. 46(3), pages 493-510, October.
- Anthon, Signe & Bogetoft, Peter & Thorsen, Bo Jellesmark, 2007. "Socially optimal procurement with tight budgets and rationing," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1625-1642, August.
- Uwe Latacz-Lohmann & Carel Van der Hamsvoort, 1997. "Auctioning Conservation Contracts: A Theoretical Analysis and an Application," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 407-418.
- Richard Jensen, 2003. "Innovative leadership: First-mover advantages in new product adoption," Economic Theory, Springer, vol. 21(1), pages 97-116, 01.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.