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A dynamic common property resource problem with amenity value and extraction costs

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  • Gerhard Sorger

Abstract

An analytically tractable differential game is presented that describes the exploitation of a common‐property resource by finitely many competing players. The resource stock has an amenity value and there are positive extraction costs. We derive both the cooperative solution and Markov‐perfect Nash equilibria of the non‐cooperative game. After a comparative analysis of the equilibrium strategies and payoffs with respect to all model parameters, we study the effect of a unilateral extraction restriction and discuss the design of a revenue‐neutral tax/transfer scheme that supports the cooperative solution.

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  • Gerhard Sorger, 2005. "A dynamic common property resource problem with amenity value and extraction costs," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(1), pages 3-19, March.
  • Handle: RePEc:bla:ijethy:v:1:y:2005:i:1:p:3-19
    DOI: 10.1111/j.1742-7363.2005.00002.x
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    File URL: https://doi.org/10.1111/j.1742-7363.2005.00002.x
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    11. Walker, Adam N. & Weikard, Hans-Peter & Richter, Andries, 2015. "The Rise and Fall of the Great Fish Pact under Endogenous Risk of Stock Collapse," Climate Change and Sustainable Development 206466, Fondazione Eni Enrico Mattei (FEEM).
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