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Communication and the Extraction of Natural Renewable Resources with Threshold Externalities

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  • C. Monica Capra
  • Tomomi Tanaka

Abstract

Nonbinding communication, or cheap talk, has been associated with the resolution of coordination failures and social dilemmas in both laboratory and field experiments (see Cooper, et al., 1992, and Clark, Kay, and Sefton, 2000; Isaac and Walker, 1991; Ostrom and Walker, 1991; Ostrom, Gardner and Walker, 1994; and Cardenas, Ahn, and Ostrom, 2003). In simple coordination games, communication is expected to reduce the uncertainty of what other players are likely to do and hence facilitate coordination in the better equilibrium. In social dilemma games, the reasons why communication works are still unclear. Perhaps communication results in an increased sense of group identity, an enhancement of normative orientations toward cooperation, or a necessity to avoid (seek) verbal reprimand (approval) when promises of cooperation are violated (fulfilled). In this paper we use a simple neoclassical growth model with multiple equilibria to investigate the mechanism by which non-binding communication results in lower equilibrium resource extraction. We use a growth model because it provides an adequate dynamic framework for modeling extraction of a natural resource with threshold externalities.

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0602.

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Date of creation: Feb 2006
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Handle: RePEc:emo:wp2003:0602

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  1. COOPER, R. & DEJONG, D.V. & FORSYTHE, R. & Tom Ross, 1989. "Communication In Coordination Games," Carleton Industrial Organization Research Unit (CIORU) 89-07, Carleton University, Department of Economics.
  2. Isaac, R. Mark & McCue, Kenneth F. & Plott, Charles R., . "Public Goods Provision in an Experimental Environment," Working Papers 428, California Institute of Technology, Division of the Humanities and Social Sciences.
  3. Kenneth Clark & Stephen Kay & Martin Sefton, 1997. "When Are Nash Equilibria Self-Enforcing? An Experimental Analysis," Experimental 9707001, EconWPA.
  4. Lei, V. & Noussair, C., 2000. "An Experimental Test of an Optimal Growth Model," Purdue University Economics Working Papers 1131, Purdue University, Department of Economics.
  5. Vivian Lei & Charles N. Noussair, 2007. "Equilibrium Selection in an Experimental Macroeconomy," Southern Economic Journal, Southern Economic Association, vol. 74(2), pages 448-482, October.
  6. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2003. "Monetary and Nonmonetary Punishment in the Voluntary Contributions Mechanism," American Economic Review, American Economic Association, vol. 93(1), pages 366-380, March.
  7. Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May.
  8. C. Mónica Capra & Tomomi Tanaka & Colin F. Camerer & Lauren Munyan & Veronica Sovero & Lisa Wang & Charles Noussair, 2005. "The Impact of Simple Institutions in Experimental Economies with Poverty Traps," Levine's Bibliography 666156000000000662, UCLA Department of Economics.
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