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Can Uncertainty Alleviate the Commons Problem?

Author

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  • Yann Bramoullé
  • Nicolas Treich

Abstract

Global commons problems, such as climate change, are often affected by severe uncertainty. The paper examines the effect of uncertainty on pollution emissions and welfare in a strategic context. We find that emissions are always lower under uncertainty than under certainty, reflecting risk-reducing considerations. We show that uncertainty can have a net positive impact on the welfare of risk-averse polluters. We extend the analysis to increases in risk, increases in risk-aversion, and to risk heterogeneity. (JEL: D81, C72, Q54, H23) (c) 2009 by the European Economic Association.

Suggested Citation

  • Yann Bramoullé & Nicolas Treich, 2009. "Can Uncertainty Alleviate the Commons Problem?," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1042-1067, September.
  • Handle: RePEc:tpr:jeurec:v:7:y:2009:i:5:p:1042-1067
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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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