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Threat Positions and the Resolution of Environmental Conflicts

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  • Jerrell Richer
  • John K. Stranlund

Abstract

In the classic externality problem of one polluting firm and a passive victim we consider bargaining when the firm has the prior right to pollute. Assuming that a threat made prior to bargaining is perceived to be credible, the firm will commit itself to an output level that is higher than both the efficient and profit-maximizing levels. In an extension, we assume that the firm makes an irreversible investment in production capability to give its threat credibility. We show that a credible investment must be greater than or equal to the profit-maximizing investment.

Suggested Citation

  • Jerrell Richer & John K. Stranlund, 1997. "Threat Positions and the Resolution of Environmental Conflicts," Land Economics, University of Wisconsin Press, vol. 73(1), pages 58-71.
  • Handle: RePEc:uwp:landec:v:73:y:1997:i:1:p:58-71
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    Cited by:

    1. Tim Swanson & Ben Groom, 2012. "Regulating global biodiversity: what is the problem?," Oxford Review of Economic Policy, Oxford University Press, vol. 28(1), pages 114-138, Spring.
    2. Fraser, Iain & Chisholm, Tony, 2000. "Conservation or cultural heritage? Cattle grazing in the Victoria Alpine National Park," Ecological Economics, Elsevier, vol. 33(1), pages 63-75, April.
    3. Stranlund, John K., 1999. "Bargaining to preserve a unique ecosystem: the role of anticipatory investments to establish stronger bargaining positions," Ecological Economics, Elsevier, vol. 31(3), pages 425-437, December.
    4. Timothy Swanson & Ben Groom, 2012. "Regulating Biodiversity: What is the Problem?," CIES Research Paper series 08-2012, Centre for International Environmental Studies, The Graduate Institute.

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