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Information Structure and the Tragedy of the Commons in Resource Extraction

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  • Rabah Amir

    ()

  • Niels Nannerup

    ()

Abstract

This paper considers the well-known Levhari-Mirman model of resource extraction, and investigates the effects of the information structure of the dynamic game - open-loop, Markovian or history-dependent - on the equilibrium consumption path and the overall utility of the agents. The open-loop regime yields a Pareto-optimal outcome. The Markovian regime leads to the most pronounced version of the tragedy of the commons. History-dependent behavior yields an outcome set that is intermediate between the other two cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information extraction strategies are based on. The analysis suggests that in environments characterized by a dynamic (and no market) externality, forcing agents to commit to open-loop behavior would constitute welfare-improving regulation.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10818-006-9001-2
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Bibliographic Info

Article provided by Springer in its journal Journal of Bioeconomics.

Volume (Year): 8 (2006)
Issue (Month): 2 (August)
Pages: 147-165

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Handle: RePEc:kap:jbioec:v:8:y:2006:i:2:p:147-165

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Web page: http://www.springerlink.com/link.asp?id=103315

Related research

Keywords: dynamic resource games; open and closed loop strategies; trigger strategies; Pareto optimality; regulation; Q20; C73; H41; Q22;

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References

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  1. AMIR , Rabah, 1995. "Continuous Stochastic Games of Capital Accumulation with Convex Transition," CORE Discussion Papers 1995009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Manjira Datta & Leonard J. Mirman, . "Externalities, Market Power, and Resource Extraction," Working Papers 97/12, Arizona State University, Department of Economics.
  3. David Levhari & Leonard J. Mirman, 1980. "The Great Fish War: An Example Using a Dynamic Cournot-Nash Solution," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 322-334, Spring.
  4. Lewis, Tracy R & Schmalensee, Richard, 1980. "On Oligopolistic Markets for Nonrenewable Natural Resources," The Quarterly Journal of Economics, MIT Press, vol. 95(3), pages 475-91, November.
  5. Easley, David & Spulber, Daniel F, 1981. "Stochastic Equilibrium and Optimality with Rolling Plans," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(1), pages 79-103, February.
  6. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  7. Jonathan Cave, 1987. "Long-Term Competition in a Dynamic Game: The Cold Fish War," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 596-610, Winter.
  8. Bergstrom, Theodore C, 1982. "On Capturing Oil Rents with a National Excise Tax," American Economic Review, American Economic Association, vol. 72(1), pages 194-201, March.
  9. Perry, Martin K, 1984. "Scale Economies, Imperfect Competition, and Public Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 313-33, March.
  10. Fischer, Ronald D. & Mirman, Leonard J., 1996. "The Compleat Fish Wars: Biological and Dynamic Interactions," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 34-42, January.
  11. 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.
  12. Dasgupta,P. S. & Heal,G. M., 1985. "Economic Theory and Exhaustible Resources," Cambridge Books, Cambridge University Press, number 9780521297615, October.
  13. Salant, Stephen W, 1976. "Exhaustible Resources and Industrial Structure: A Nash-Cournot Approach to the World Oil Market," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1079-93, October.
  14. Dockner, Engelbert J. & Kaitala, Veijo, 1989. "On efficient equilibrium solutions in dynamic games of resource management," Resources and Energy, Elsevier, vol. 11(1), pages 23-34, March.
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Cited by:
  1. AMIR, Rabah, 2001. "Stochastic games in economics and related fields: an overview," CORE Discussion Papers 2001060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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