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A Market Mechanism for Sustainable and Efficient Resource Use under Uncertainty

Author

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  • Martin F. Quaas
  • Ralph Winkler

Abstract

Sustainability and efficiency are potentially conflicting social objectives in natural resource management. We propose a market mechanism to allocate use rights over a stochastic resource to private managers. The mechanism endogenously determines the maximal tenure length guaranteeing that the sustainability goal is obeyed for sure over the entire period. In addition, the mechanism achieves efficiency, i.e. it maximizes the expected present value of resource rents that accrue to society. Potential applications include improved fishing agreements between developing countries and distant-water fishing fleets.

Suggested Citation

  • Martin F. Quaas & Ralph Winkler, 2017. "A Market Mechanism for Sustainable and Efficient Resource Use under Uncertainty," CESifo Working Paper Series 6524, CESifo.
    • Handle: RePEc:ces:ceswps:_6524
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp6524.pdf
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    More about this item

    Keywords

    auctioning-refunding-mechanism; efficient resource allocation; renewable resources; stochastic resource dynamics; sustainability;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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