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Volatility-Reducing Biodiversity Conservation Under Strategic Interactions

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  • Emmanuelle Augeraud-Véron

    (Université de Bordeaux, France)

  • Giorgio Fabbri

    (Univ. Grenoble Alpes, France)

  • Katheline Schubert

    (Paris School of Economics, Université Paris 1 Panthéon-Sorbonne, France)

Abstract

We study a model of strategic competition among farmers for land use in an agricultural economy. Each agent can take possession of a part of the collective forest land and convert it to farming. Unconverted forest land helps preserving biodiversity, which contributes to reducing the volatility of agricultural production. Agents' utility is given in terms of a Kreps Porteus stochastic differential utility capable of disentangling risk aversion and aversion to fluctuations. We characterize the land used by each farmer and her welfare at the Nash equilibrium, we evaluate the over-exploitation of the land and the agents' welfare loss compared to the socially optimal solution and we study the drivers of the inefficiencies of the decentralized equilibrium. After characterizing the value of biodiversity in the model, we use an appropriate decomposition to study the policy implications of the model by identifying in which cases the allocation of property rights is preferable to the introduction of a land conversion tax.

Suggested Citation

  • Emmanuelle Augeraud-Véron & Giorgio Fabbri & Katheline Schubert, 2020. "Volatility-Reducing Biodiversity Conservation Under Strategic Interactions," LIDAM Discussion Papers IRES 2020011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2020011
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    Cited by:

    1. Augeraud-Véron, Emmanuelle & Fabbri, Giorgio & Schubert, Katheline, 2021. "Prevention and mitigation of epidemics: Biodiversity conservation and confinement policies," Journal of Mathematical Economics, Elsevier, vol. 93(C).
    2. Augeraud-Véron, Emmanuelle & Fabbri, Giorgio & Schubert, Katheline, 2021. "Prevention and mitigation of epidemics: Biodiversity conservation and confinement policies," Journal of Mathematical Economics, Elsevier, vol. 93(C).

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    More about this item

    Keywords

    Biodiversity; insurance value; land conversion; recursive preferences; stochastic differential games;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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