A dynamic common-property resource problem with potential regime shifts
AbstractThis paper provides a general framework with which a dynamic problem with potential regime shifts can be analyzed in a strategic environment as well as from social planner’s perspective. A typical situation described by such a game is the joint exploitation of a common-property resource such as lakes, forests, marine fish populations, and at a larger scale the global climate system. By applying the framework to a simple dynamic common-property resource problem, we show that when the risk is endogenous, potential of regime shifts can facilitate precautionary management of common-property resources even in a strategic environment. It is also shown that there exists a resource-depletion trap in which a regime shift, once it happens, triggers a reversal of resource accumulation dynamics, possibly leading to a collapse of resource base.
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Bibliographic InfoPaper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-12-012.
Length: 26 pages
Date of creation: Mar 2013
Date of revision:
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Regime shift; Markov-perfect Nash equilibrium; common-property resource; tragedy of the commons;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
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