The Commons with Capital Markets
We explore a dynamic commons problem and assess the welfare consequences of access to capital markets. The commons has a high intrinsic rate of return but its fruits cannot be secured by individual agents. Capital market access allows resources to be held securely and intertemporally transferred, but at a lower rate of return. In a two period model, we completely characterise symmetric consumption and extraction behaviour in four environments: un- der a strategic and a competitive equilibrium concept, and with and without market access. Strategic equilibria dominate competitive ones: while agents disagree over how to divide the resource, all would prefer it to be larger; the strategic concept allows them to anticipate returns to their conservation. As the number of agents becomes infinite, the strategic outcome converges to the competitive; as the number of agents falls to one, it converges to the planner's. Market access has a positive effect on welfare owing to its con- sumption and extraction smoothing properties and a negative effect owing to its creation of an outside option to the commons, encouraging its depletion. A sufficient condition for autarky to dominate market access for some levels of communal endowment is that the world market discount factor exceed the subjective discount factor. Multiple equilibria may arise: these result from market access, not the equilibrium concept. Key words: commons, capital markets, Washington Consensus, property rights
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 31 (2007)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/economic+theory/journal/199/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jayasri Dutta & Colin Rowat, 2007.
"The Road to Extinction: Commons with Capital Markets,"
04-11RR, Department of Economics, University of Birmingham.
- Colin Rowat & Jayasri Dutta, 2004. "The road to extinction: commons with capital markets," Econometric Society 2004 North American Summer Meetings 145, Econometric Society.
- Jayasri Dutta & Colin Rowat, 2006. "The Road to Extinction: commons with capital markets," Discussion Papers 04-11r, Department of Economics, University of Birmingham.
- Jayasri Dutta & Colin Rowat, 2007. "The Road to Extinction: Commons with Capital Markets," WEF Working Papers 0024, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
- Jayasri Dutta & Colin Rowat, 2004. "The Road to Extinction: Commons with Capital Markets," GE, Growth, Math methods 0412001, EconWPA.
- Karla Hoff & Joseph E. Stiglitz, 2002.
"After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies,"
NBER Working Papers
9282, National Bureau of Economic Research, Inc.
- Karla Hoff & Joseph E. Stiglitz, 2004. "After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review, American Economic Association, vol. 94(3), pages 753-763, June.
- Hoff, Karla & Stiglitz, Joseph E., 2002. "After the Big Bang? Obstacles to the emergence of the rule of law in post-communist societies," Policy Research Working Paper Series 2934, The World Bank.
- Gerhard Sorger, 1997.
"Markov-perfect Nash equilibria in a class of resource games,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(1), pages 79-100.
- Gerhard Sorger, 1996. "Markov Perfect Nash Equilibria in a Class of Resource Games," CIRANO Working Papers 96s-15, CIRANO.
- Benhabib, Jess & Radner, Roy, 1992. "The Joint Exploitation of a Productive Asset: A Game-Theoretic Approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 2(2), pages 155-190, April.
- Konstantin Sonin, 2002.
"Why the Rich May Favor Poor Protection of Property Rights,"
William Davidson Institute Working Papers Series
544, William Davidson Institute at the University of Michigan.
- Sonin, Konstantin, 2003. "Why the rich may favor poor protection of property rights," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 715-731, December.
- Konstantin Sonin, 2003. "Why the Rich May Favor Poor Protection of Property Rights," Working Papers w0022, Center for Economic and Financial Research (CEFIR).
- Williamson, John, 2000. "What Should the World Bank Think about the Washington Consensus?," World Bank Research Observer, World Bank Group, vol. 15(2), pages 251-264, August.
- Brooks, R. & Controneo, J. & Murray, M. & Salant, S., 1995.
"When is the Standard Analysis of Common Property Extraction Under Free Access Correct? -- A Game - Theoretic Justification for Non Game-Theoretic Analyses,"
95-10, Michigan - Center for Research on Economic & Social Theory.
- Robin Brooks & Michael Murray & Stephen Salant & Jill C. Weise, 1999. "When Is the Standard Analysis of Common Property Extraction under Free Access Correct? A Game-Theoretic Justification for Non-Game-Theoretic Analyses," Journal of Political Economy, University of Chicago Press, vol. 107(4), pages 843-858, August.
- Clark, Colin W, 1973. "Profit Maximization and the Extinction of Animal Species," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 950-961, July-Aug..
- Michael Kremer & Charles Morcom, 2003. "Elephants: Reply," American Economic Review, American Economic Association, vol. 93(4), pages 1446-1448, September.
- Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-1231, December.
- Dockner, Engelbert J. & Sorger, Gerhard, 1996. "Existence and Properties of Equilibria for a Dynamic Game on Productive Assets," Journal of Economic Theory, Elsevier, vol. 71(1), pages 209-227, October.
- Homans, Frances R. & Wilen, James E., 2005. "Markets and rent dissipation in regulated open access fisheries," Journal of Environmental Economics and Management, Elsevier, vol. 49(2), pages 381-404, March.
- R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
- Erwin H. Bulte & Richard D. Horan & Jason F. Shogren, 2003. "Elephants: Comment," American Economic Review, American Economic Association, vol. 93(4), pages 1437-1445, September.
- Vives, Xavier, 2004. "Complementarities and Games: New Developments," CEPR Discussion Papers 4742, C.E.P.R. Discussion Papers.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2000.
"The Colonial Origins of Comparative Development: An Empirical Investigation,"
NBER Working Papers
7771, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
- Timothy Besley & Robin Burgess, 2003. "Halving Global Poverty," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 3-22, Summer.
- Dutta, Prajit K & Sundaram, Rangarajan K, 1993. "The Tragedy of the Commons?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(3), pages 413-426, July.
- Philip R. Lane & Aaron Tornell, 1999. "The Voracity Effect," American Economic Review, American Economic Association, vol. 89(1), pages 22-46, March.
- 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.
- Harris, Christopher & Reny, Philip & Robson, Arthur, 1995. "The Existence of Subgame-Perfect Equilibrium in Continuous Games with Almost Perfect Information: A Case for Public Randomization," Econometrica, Econometric Society, vol. 63(3), pages 507-544, May.
When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:31:y:2007:i:2:p:225-254. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.