A free lunch in the commons
AbstractWe derive conditions under which raising costs through a regulatory constraint or a fully expropriated tax can increase the profits arising from a common-pool resource. The basic model assumes a fixed number of identical agents with linear costs selling in a single period at an exogenous price. A necessary and sufficient condition for a cost increase to be profitable is that aggregate output from the resource be locally convex in aggregate effort. We also show that cost increases can be profitable even if price is endogenous, agents are heterogeneous, entry is costless, or agents are playing a Markov-perfect equilibrium of a dynamic game. We also discuss more general welfare implications of the result along with its relation to existing results for a Cournot oligopoly.
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.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Environmental Economics and Management.
Volume (Year): 61 (2011)
Issue (Month): 3 (May)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622870
Common-pool resources Cournot oligopoly Policy Profits Welfare;
Other versions of this item:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
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.:
- Heintzelman, Martin & Salant, Stephen W. & Schott, Stephan, 2008.
"Putting Free-Riding to Work: A Partnership Solution to the Common-Property Problem,"
9804, University Library of Munich, Germany.
- Heintzelman, Martin D. & Salant, Stephen W. & Schott, Stephan, 2009. "Putting free-riding to work: A Partnership Solution to the common-property problem," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 309-320, May.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521322249, October.
- Bergstrom, Theodore C & Varian, Hal R, 1985. "When Are Nash Equilibria Independent of the Distribution of Agents' Characteristics?," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 715-18, October.
- Cheung, Steven N S, 1970. "The Structure of a Contract and the Theory of a Non-exclusive Resource," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 49-70, April.
- Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
- Tarui, Nori & Mason, Charles F. & Polasky, Stephen & Ellis, Greg, 2008.
"Cooperation in the commons with unobservable actions,"
Journal of Environmental Economics and Management,
Elsevier, vol. 55(1), pages 37-51, January.
- Nori Tarui & Charles Mason & Stephen Polasky & Greg Ellis, 2007. "Cooperation in the Commons with Unobservable Actions," Working Papers 200711, University of Hawaii at Manoa, Department of Economics.
- Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
- Nitzan, Shmuel, 1991. "Collective Rent Dissipation," Economic Journal, Royal Economic Society, vol. 101(409), pages 1522-34, November.
- Chung, Tai-Yeong, 1996. " Rent-Seeking Contest When the Prize Increases with Aggregate Efforts," Public Choice, Springer, vol. 87(1-2), pages 55-66, April.
- H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124.
- Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
- Baik, Kyung Hwan & Lee, Sanghack, 2001. "Strategic Groups and Rent Dissipation," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 672-84, October.
- Baumol,William J. & Oates,Wallace E., 1988. "The Theory of Environmental Policy," Cambridge Books, Cambridge University Press, number 9780521311120, October.
- Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
- Stephen Polasky & Nori Tarui & Gregory Ellis & Charles Mason, 2006. "Cooperation in the commons," Economic Theory, Springer, vol. 29(1), pages 71-88, September.
- Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, number 9780521297615, October.
- McQuade, Timothy & Salant, Stephen W. & Winfree, Jason, 2009.
"Markets with untraceable goods of unknown quality: a market failure exacerbated by globalization,"
21874, University Library of Munich, Germany.
- McQuade, Timothy & Salant, Stephen W. & Winfree, Jason, 2010. "Markets with Untraceable Goods of Unknown Quality: A Market Failure Exacerbated by Globalization," Discussion Papers dp-09-31, Resources For the Future.
- Olivier Bos & Béatrice Roussillon & Paul Schweinzer, 2013. "Agreeing on Efficient Emissions Reduction," CESifo Working Paper Series 4345, CESifo Group Munich.
- Clémence Christin & Jean-Philippe Nicolai & Jerome Pouyet, 2013. "Pollution Permits, Imperfect Competition and Abatement Technologies," CER-ETH Economics working paper series 13/186, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Ansink, Erik & Bouma, Jetske, 2013. "Effective support for community resource management," Forest Policy and Economics, Elsevier, vol. 37(C), pages 94-103.
If references are entirely missing, you can add them using this form.