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On strategic incentives and the management of stochastic renewable resources

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  • Hennlock, Magnus
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    Abstract

    The thesis consists of four theoretical articles that can be read independently of each other on the common topic - strategic incentives in the management of natural resources. Article I concerns biodiversity conservation of essential species in sustaining the ecosystem. The issue is what forces that may explain why a natural resource stock declines although the government is running a conservation programme in a second-best solution. The focus is on the government's strategic behavior against the industry being a polluter. Ten forces are identified that explains why a resource may decline under a conservation programme. One result is that an increase in the variance of the natural growth process does not lead to an increase in investment in the emission-generating industry in the second-best solution, as in the first-best solution. In article II, a marine natural resource stock is exposed to harvest as well as damage by pollution from N countries. Each country has four decision variables: harvest effort, domestic production (generating transboundary pollution), abatement and research in environmental technology. It is shown that the marine resource is damaged `twice' as a result of a `chain effect' in the strategic incentives among the countries. A harvest function is introduced, which results in `tough' harvest efforts, implying that agents' effort increases the smaller the expected stock size as an extreme case of the `tragedy of the commons'. In article III, the classical upstream-downstream case is analyzed under the assumptions of the Coase theorem in a dynamic model. Different assignments of rights to determine the level of externality are compared to the case of no-cooperation. It is shown that the `efficiency proposition' does not necessarily hold. Specifically, a bargaining outcome may not be possible when downstream society has the right to determine the level of externality in the dynamic model as it may violate individual rationality of upstream society. In the fourth article - a technical note - it is shown in a that in most models with private provision of public goods, there exists a simple mechanism determining the reaction functions of the players.

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    Bibliographic Info

    Paper provided by Swedish University of Agricultural Sciences, Department of Economics in its series Department of Economics publications with number 1018.

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    Date of creation: Jan 2005
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    Handle: RePEc:sua:ekonwp:1018

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    Cited by:
    1. Hennlock, Magnus, 2009. "A Note on the Cost-Benefit Ratio in Self-Enforcing Agreements," Working Papers in Economics 350, University of Gothenburg, Department of Economics.

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