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Externalities, Market Power, and Resource Extraction

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Abstract

This paper analyzes the effect of market power in a model with dynamic and biological externalities. When several countries harvest fish in international waters the evolution of fish population is affected by their joint action, thus, generating a biological and a dynamic externality. If there is trade in fish, the market-clearing prices depend on the harvesting and consumption decision made in every country. Therefore, market-clearing prices generate another type of interdependence. The planners' make their policy decision by taking account of various externalities.We find a subgame perfect Cournot-Nash equilibrium and the conditions under which it may be efficient. We also study the role of different externalities in generating inefficiency.

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  • Manjira Datta & Leonard Mirman, "undated". "Externalities, Market Power, and Resource Extraction," Working Papers 2132842, Department of Economics, W. P. Carey School of Business, Arizona State University.
    • Handle: RePEc:asu:wpaper:2132842
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    References listed on IDEAS

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    1. Datta, Manjira & Mirman, Leonard J, 2000. "Dynamic Externalities and Policy Coordination," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 44-59, February.
    2. Datta, Manjira, 1997. "Externalities and Price Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 587-603, August.
    3. Brander, James A. & Scott Taylor, M., 1998. "Open access renewable resources: Trade and trade policy in a two-country model," Journal of International Economics, Elsevier, vol. 44(2), pages 181-209, April.
    4. Karp, Larry, 1992. "Social Welfare in a Common Property Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 353-372, May.
    5. Fischer, Ronald D. & Mirman, Leonard J., 1996. "The Compleat Fish Wars: Biological and Dynamic Interactions," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 34-42, January.
    6. Reinganum, Jennifer F & Stokey, Nancy L, 1985. "Oligopoly Extraction of a Common Property Natural Resource: The Importance of the Period of Commitment in Dynamic Games," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(1), pages 161-173, February.
    7. Copeland, Brian R., 1990. "Strategic enhancement and destruction of fisheries and the environment in the presence of international externalities," Journal of Environmental Economics and Management, Elsevier, vol. 19(3), pages 213-226, November.
    8. 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.
    9. Fischer, Ronald D. & Mirman, Leonard J., 1992. "Strategic dynamic interaction : Fish wars," Journal of Economic Dynamics and Control, Elsevier, vol. 16(2), pages 267-287, April.
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    Citations

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    Cited by:

    1. Juin-Jen Chang & Jhy-Hwa Chen & Jhy-Yuan Shieh & Ching-Chong Lai, 2009. "Optimal Tax Policy, Market Imperfections, and Environmental Externalities in a Dynamic Optimizing Macro Model," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(4), pages 623-651, August.
    2. Mirman, Leonard J. & To, Ted, 2005. "Strategic resource extraction, capital accumulation and overlapping generations," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 378-386, September.
    3. Rabah Amir & Niels Nannerup, 2006. "Information Structure and the Tragedy of the Commons in Resource Extraction," Journal of Bioeconomics, Springer, vol. 8(2), pages 147-165, August.
    4. BALESTRA, Carlotta & BRECHET, Thierry & LAMBRECHT, Stéphane, 2010. "Property rights with biological spillovers: when Hardin meets Meade," CORE Discussion Papers 2010071, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Cissé, A.A. & Doyen, L. & Blanchard, F. & Béné, C. & Péreau, J.-C., 2015. "Ecoviability for small-scale fisheries in the context of food security constraints," Ecological Economics, Elsevier, vol. 119(C), pages 39-52.
    6. Emmi Nieminen & Lone Grønbæk Kronbak & Marko Lindroos, 2016. "International Agreements in the Multispecies Baltic Sea Fisheries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 109-134, September.
    7. Manjira Datta & Leonard Mirman & Olivier Morand & Kevin Reffett, "undated". "Lattice Methods in Computation of Sequential Markov Equilibrium in Dynamic Games," Working Papers 2179545, Department of Economics, W. P. Carey School of Business, Arizona State University.
    8. Alexandre Croutzet & Pierre Lasserre, 2016. "Optimal Completeness of Property Rights on Renewable Resources in Presence of Market Power," CIRANO Working Papers 2016s-39, CIRANO.
    9. Ngo Long, 2011. "Dynamic Games in the Economics of Natural Resources: A Survey," Dynamic Games and Applications, Springer, vol. 1(1), pages 115-148, March.
    10. Pham Do, K.H. & Folmer, H., 2003. "International Fisheries Agreements : The Feasibility and Impacts of Partial Cooperation," Discussion Paper 2003-52, Tilburg University, Center for Economic Research.
    11. Eric Fesselmeyer & Leonard J. Mirman & Marc Santugini, 2016. "Strategic Interactions in a One-Sector Growth Model," Dynamic Games and Applications, Springer, vol. 6(2), pages 209-224, June.
    12. Rodriguez Acosta, Mauricio, 2016. "Essays in political economy and resource economic : A macroeconomic approach," Other publications TiSEM 1e39ef1b-43a2-4f95-892c-6, Tilburg University, School of Economics and Management.
    13. Klaus Schenk-Hoppé, 2002. "Sample-Path Stability of Non-Stationary Dynamic Economic Systems," Annals of Operations Research, Springer, vol. 114(1), pages 263-280, August.
    14. Andrzej Nowak, 2006. "A note on an equilibrium in the great fish war game," Economics Bulletin, AccessEcon, vol. 17(2), pages 1-10.
    15. Bischi, Gian Italo & Lamantia, Fabio, 2007. "Harvesting dynamics in protected and unprotected areas," Journal of Economic Behavior & Organization, Elsevier, vol. 62(3), pages 348-370, March.
    16. Eppink, Florian V. & van den Bergh, Jeroen C.J.M., 2007. "Ecological theories and indicators in economic models of biodiversity loss and conservation: A critical review," Ecological Economics, Elsevier, vol. 61(2-3), pages 284-293, March.
    17. Do, Kim Hang Pham & Folmer, Henk, 2004. "Regional Fishery Management Organization as Games in Coalitional Form," 2004 Conference, June 25-26, 2004, Blenheim, New Zealand 97792, New Zealand Agricultural and Resource Economics Society.
    18. Haavio, Markus, 2005. "Transboundary pollution and household mobility: Are they equivalent?," Journal of Environmental Economics and Management, Elsevier, vol. 50(2), pages 252-275, September.
    19. Mauricio Rodriguez & Sjak Smulders, 2016. "Dynamic Resource Management under Weak Property Rights: A Tale of Thieves and Trespassers," CESifo Working Paper Series 6019, CESifo Group Munich.
    20. Wang, Wen-Kai & Ewald, Christian-Oliver, 2010. "A stochastic differential Fishery game for a two species fish population with ecological interaction," Journal of Economic Dynamics and Control, Elsevier, vol. 34(5), pages 844-857, May.
    21. CISSE Abdoul & SANZ Nicolas & BLANCHARD Fabien & DOYEN Luc & PEREAU Jean-Christophe, 2015. "The tragedy of ecosystems in open-access," Cahiers du GREThA 2015-02, Groupe de Recherche en Economie Théorique et Appliquée.
    22. Quérou, N. & Tidball, M., 2010. "Incomplete information, learning, and natural resource management," European Journal of Operational Research, Elsevier, vol. 204(3), pages 630-638, August.
    23. repec:eee:resene:v:49:y:2017:i:c:p:16-32 is not listed on IDEAS
    24. Sandal, Leif K. & Steinshamn, Stein I., 2004. "Dynamic Cournot-competitive harvesting of a common pool resource," Journal of Economic Dynamics and Control, Elsevier, vol. 28(9), pages 1781-1799, July.

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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