The Public Resource Management Game
AbstractUse of public resources for private economic gain is a longstanding, contested political issue. Public resources generate benefits beyond commodity uses, including recreation, environmental and ecological conservation and preservation, and existence and aesthetic values. We analyze this problem using a dynamic resource use game. Low use fees let commodity users capture more of the marginal benefit from private use. This increases the incentive to comply with government regulations. Optimal contracts therefore include public use fees that are lower than private rates. The optimal policy also includes random monitoring to prevent strategic learning and cheating on the use agreements and to avoid wasteful efforts to disguise noncompliant behavior. An optimal policy also includes a penalty for cheating beyond terminating the use contract. This penalty must be large enough that the commodity user who would gain the most from noncompliance experiences a negative expected net return.
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Bibliographic InfoPaper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 29-11.
Length: 27 pages
Date of creation: Dec 2011
Date of revision:
Contact details of provider:
Postal: Department of Economics, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/eco/
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
- NEP-CTA-2012-01-10 (Contract Theory & Applications)
- NEP-ENV-2012-01-10 (Environmental Economics)
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