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The tradeoff of the commons under stochastic use

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  • Cao, Xiaoyong
  • Gong, Jiong

Abstract

We develop a model of scarce renewable resources to study the problem of the commons. Our model formulation differs from the existing literature in that it assumes the use of the commons to be stochastic in nature. One example is microwave spectrum for mobile and wireless communications. We investigate three mechanisms of resource allocation: free usage, the exclusive franchise, and a regulated monopoly. We show that the welfare tradeoff among these three mechanisms depends on the characteristics of the commons and their usage patterns. In particular, we find that property rights are not always the best solution. We then make four extensions that apply to spectrum allocations.

Suggested Citation

  • Cao, Xiaoyong & Gong, Jiong, 2017. "The tradeoff of the commons under stochastic use," Journal of Public Economics, Elsevier, vol. 145(C), pages 150-161.
    • Handle: RePEc:eee:pubeco:v:145:y:2017:i:c:p:150-161
    DOI: 10.1016/j.jpubeco.2016.11.001
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    References listed on IDEAS

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    1. Thomas W. Hazlett & Roberto E. Muñoz, 2009. "A welfare analysis of spectrum allocation policies," RAND Journal of Economics, RAND Corporation, vol. 40(3), pages 424-454, September.
    2. McAfee, R. Preston & Miller, Alan D., 2012. "The tradeoff of the commons," Journal of Public Economics, Elsevier, vol. 96(3), pages 349-353.
    3. Thomas W. Hazlett, 2008. "Optimal Abolition of FCC Spectrum Allocation," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 103-128, Winter.
    4. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124-124.
    5. Minervini, Leo Fulvio, 2014. "Spectrum management reform: Rethinking practices," Telecommunications Policy, Elsevier, vol. 38(2), pages 136-146.
    6. Brennan, Timothy J, 1998. "The Spectrum as Commons: Tomorrow's Vision, Not Today's Prescription," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 791-803, October.
    7. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 9, pages 178-203, Palgrave Macmillan.
    8. R. Preston McAfee & John McMillan, 1996. "Analyzing the Airwaves Auction," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 159-175, Winter.
    9. Hazlett, Thomas W, 1998. "Spectrum Flash Dance: Eli Noam's Proposal for "Open Access" to Radio Waves," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 805-820, October.
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    More about this item

    Keywords

    Commons; Pricing; Welfare;
    All these keywords.

    JEL classification:

    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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