Strategic Exploitation of a Common Resource under Environmental Risk
We study the effect of environmental risk on the extraction of a common resource. Using a dynamic and non-cooperative game in which an environmental event impacts both the renewability (the future quantity) and the quality of the resource, we show that the anticipation of such an event has an ambiguous effect on present extraction and the tragedy of the commons. On the one hand, a risk of a reduction in the renewability induces the agents to extract less in the present. On the other hand, a risk of a deterioration in the quality of the resource induces the agents to extract more in the present. We then establish a negative relation between conservative behavior and the tragedy of the commons. In particular, when environmental risk induces conservation (when the risk of less renewability is more important than the risk of quality deterioration), there is a larger decrease in present harvesting under social planning than in the non-cooperative game, and the tragedy of the commons is worsened. The reason is that in a non-cooperative game agents do not internalize the risk that too much extraction creates for others, and, thus, decrease their own extraction too little. The social planner does internalize the effect of conservation on all agents, and decreases harvesting more than in the non-cooperative game, which reduces the risk for the whole group of agents. This disparity in conservation leads to a worsening of the tragedy of the commons in addition to overexposure to the risk of less renewability in the non-cooperative game.
|Date of creation:||Dec 2009|
|Date of revision:||Feb 2012|
|Contact details of provider:|| Postal: |
Phone: (514) 340-6463
Fax: (514) 340-6469
Web page: http://www.hec.ca/iea/
More information through EDIRC
|Order Information:|| Postal: Institut d'économie appliquée HEC Montréal 3000, Chemin de la Côte-Sainte-Catherine Montréal, Québec H3T 2A7|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laurent-Lucchetti, Jérémy & Santugini, Marc, 2012.
"Ownership risk and the use of common-pool natural resources,"
Journal of Environmental Economics and Management,
Elsevier, vol. 63(2), pages 242-259.
- Jérémy LAURENT-LUCCHETTI & Marc SANTUGINI, 2010. "Ownership Risk and the Use of Common-Pool Natural Resources," Cahiers de recherche 10-03, HEC Montréal, Institut d'économie appliquée, revised May 2011.
- Tsur, Yacov & Zemel, Amos, 1998. "Pollution control in an uncertain environment," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 967-975, June.
- Long, Ngo Van, 1975. "Resource extraction under the uncertainty about possible nationalization," Journal of Economic Theory, Elsevier, vol. 10(1), pages 42-53, February.
- Tsur, Yacov & Zemel, Amos, 1996. "Accounting for global warming risks: Resource management under event uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1289-1305.
- Mitra, Tapan & Roy, Santanu, 2003.
"Optimal Exploitation of Renewable Resources under Uncertainty and the Extinction of Species,"
03-10, Cornell University, Center for Analytic Economics.
- Tapan Mitra & Santanu Roy, 2006. "Optimal exploitation of renewable resources under uncertainty and the extinction of species," Economic Theory, Springer, vol. 28(1), pages 1-23, 05.
- Laukkanen, Marita, 2003. "Cooperative and non-cooperative harvesting in a stochastic sequential fishery," Journal of Environmental Economics and Management, Elsevier, vol. 45(2, Supple), pages 454-473, March.
- 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.
- Bohn, Henning & Deacon, Robert, 1997.
"Ownership Risk, Investment, and the Use of Natural Resources,"
dp-97-20, Resources For the Future.
- Robert T. Deacon & Henning Bohn, 2000. "Ownership Risk, Investment, and the Use of Natural Resources," American Economic Review, American Economic Association, vol. 90(3), pages 526-549, June.
- Epstein, Gil S., 1996. "The extraction of natural resources from two sites under uncertainty," Economics Letters, Elsevier, vol. 51(3), pages 309-313, June.
- Luis H. R. Alvarez & Erkki Koskela, 2004.
"Does Risk Aversion Accelerate Optimal Forest Rotation under Uncertainty?,"
CESifo Working Paper Series
1285, CESifo Group Munich.
- Alvarez, Luis H.R. & Koskela, Erkki, 2006. "Does risk aversion accelerate optimal forest rotation under uncertainty?," Journal of Forest Economics, Elsevier, vol. 12(3), pages 171-184, December.
- Just, Richard E. & Netanyahu, Sinaia & Olson, Lars J., 2005. "Depletion of natural resources, technological uncertainty, and the adoption of technological substitutes," Resource and Energy Economics, Elsevier, vol. 27(2), pages 91-108, June.
- Clarke, Harry R. & Reed, William J., 1994. "Consumption/pollution tradeoffs in an environment vulnerable to pollution-related catastrophic collapse," Journal of Economic Dynamics and Control, Elsevier, vol. 18(5), pages 991-1010, September.
- Reed, William J., 1993. "The decision to conserve or harvest old-growth forest," Ecological Economics, Elsevier, vol. 8(1), pages 45-69, August.
- Stephen Polasky & Aart de Zeeuw & Florian Wagener, 2010.
"Optimal Management with Potential Regime Shifts,"
CESifo Working Paper Series
3237, CESifo Group Munich.
- Christos Koulovatianos & Elena Antoniadou & Leonard J.Mirman, 2007.
"Strategic Exploitation of a Common-Property Resource under Uncertainty,"
Vienna Economics Papers
0703, University of Vienna, Department of Economics.
- Antoniadou, Elena & Koulovatianos, Christos & Mirman, Leonard J., 2013. "Strategic exploitation of a common-property resource under uncertainty," Journal of Environmental Economics and Management, Elsevier, vol. 65(1), pages 28-39.
- Gilles Lafforgue, 2005. "Uncertainty and Amenity Values in Renewable Resource Economics," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 31(3), pages 369-383, 07.
- Feliz, Raul Anibal, 1993. "The optimal extraction rate of a natural resource under uncertainty," Economics Letters, Elsevier, vol. 43(2), pages 231-234.
- Mirman, Leonard J. & Spulber, Daniel F., 1984. "Uncertainty and markets for renewable resources," Journal of Economic Dynamics and Control, Elsevier, vol. 8(3), pages 239-264, December.
- Amir, Rabah, 1996.
"Continuous Stochastic Games of Capital Accumulation with Convex Transitions,"
Games and Economic Behavior,
Elsevier, vol. 15(2), pages 111-131, August.
- AMIR , Rabah, 1995. "Continuous Stochastic Games of Capital Accumulation with Convex Transition," CORE Discussion Papers 1995009, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Tsur Yacov & Zemel Amos, 1995. "Uncertainty and Irreversibility in Groundwater Resource Management," Journal of Environmental Economics and Management, Elsevier, vol. 29(2), pages 149-161, September.
- Philippe Michel & Gilles Rotillon, 1995. "Disutility of pollution and endogenous growth," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 6(3), pages 279-300, October.
When requesting a correction, please mention this item's handle: RePEc:iea:carech:0908. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia Power)
If references are entirely missing, you can add them using this form.