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Spatial dynamics and optimal resource extraction

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  • Pamela Giselle Katic

Abstract

Extraction from a common pool resource may result in a divergence between competitive and optimal rates of extraction. This paper develops a theoretical model to estimate the size of the payoffs from this divergence under alternative spatial representations. Results show that when a resource is heterogeneously distributed spatially, assuming a spatially homogeneous distribution can underestimate the losses with competitive extraction. An application of the model to a real-world aquifer shows the importance of recognizing spatial heterogeneity in resource extraction problems to: (1) provide robust estimates of the costs of sub-optimal extraction and; (2) implement appropriate corrective policies.

Suggested Citation

  • Pamela Giselle Katic, 2010. "Spatial dynamics and optimal resource extraction," Centre for Water Economics, Environment and Policy Papers 1002, Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:cweanu:1002
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    File URL: http://cweep.anu.edu.au/pdf/publications/research_papers/10-02_SpatialDynamics.pdf
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    References listed on IDEAS

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    Cited by:

    1. Nathaniel H Merrill & Todd Guilfoos, 2018. "Optimal Groundwater Extraction under Uncertainty and a Spatial Stock Externality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 220-238.

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    More about this item

    Keywords

    spatial dynamics; common pool resources; externalities; groundwater extraction;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General

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