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Regulating Renewable Resources under Uncertainty

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Author Info

  • Lars Gårn Hansen

    ()
    (Institute of Food and Resource Economics, University of Copenhagen)

Abstract

Renewable natural resources (like water, fish and wildlife stocks, forests and grazing lands) are critical for the livelihood of millions of people and understanding how they can be managed efficiently is an important economic problem. I show how regulator uncertainty about different economic and ecological parts of the harvesting system affect the optimal choice of instrument for regulating harvesters. I bring prior results into a unified framework and add to these by showing that: 1) quotas are preferred under ecological uncertainty if there are substantial diseconomies of scale in harvesting, 2) that a pro-quota result under uncertainty about prices and marginal costs is unlikely, requiring that the resource growth function is highly concave locally around the optimum and, 3) that quotas are always preferred if uncertainly about underlying structural economic parameters dominates. These results showing that quotas are preferred in a number of situations qualify the pro fee message dominating prior studies.

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File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2012/WP_2012_3_regulating_renewable.pdf
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Bibliographic Info

Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series IFRO Working Paper with number 2012/3.

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Length: 44 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:foi:wpaper:2012_3

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Web page: http://www.ifro.ku.dk/
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Related research

Keywords: Prices vs. quantities; renewable resource regulation;

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  1. Weitzman, Martin L., 2002. "Landing Fees vs Harvest Quotas with Uncertain Fish Stocks," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 325-338, March.
  2. Lars G. Hansen & Frank Jensen & Clifford Russell, 2008. "The Choice of Regulatory Instrument When There Is Uncertainty About Compliance with Fisheries Regulations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(4), pages 1130-1142.
  3. Frank Jensen & Niels Vestergaard, 2003. "Prices versus Quantities in Fisheries Models," Land Economics, University of Wisconsin Press, vol. 79(3), pages 415-425.
  4. Lars Gårn Hansen, 2008. "Prices versus Quantities in Fisheries Models: Comment," Land Economics, University of Wisconsin Press, vol. 84(4), pages 708-711.
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