Splitting an Uncertain (Natural) Capital
Most natural commons are subject to discontinuities and threshold effects, so their gradual depletion may result in a sudden irreversible loss of the associated ecological services. Yet, it is often impossible to locate these thresholds with certainty. We analyze this context using a variant of the divide-the-dollar game, in which the amount to be split among players follows a discrete or multimodal probability distribution. ‘Cautious equilibria’ – where agents collectively behave as if the worst-case scenario were certain - are found to coexist with ‘dangerous equilibria’ - where overall demand for ecological services might lead to their collapse - and ‘dreadful equilibria’ - where agents collectively request so much natural capital that a collapse of ecological services is certain, even if all agents are risk averse. Communication/cooperation among agents, however, which raises the possibility of coordinated group deviations, would eliminate dreadful equilibria and reduce the occurrence of dangerous equilibria, while cautious equilibria are robust to such deviations. A direct corollary is that dangerous equilibria are Pareto-dominated by any cautious equilibrium in which all agents claim less natural capital. These results shed light on the management of common-pool resources, international climate change negotiations, and the implementation of precautionary policies.
|Date of creation:||Jan 2011|
|Date of revision:|
|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.:
- Ostrom, Elinor, 2009.
"Beyond Markets and States: Polycentric Governance of Complex Economic Systems,"
Nobel Prize in Economics documents
2009-4, Nobel Prize Committee.
- Elinor Ostrom, 2010. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," American Economic Review, American Economic Association, vol. 100(3), pages 641-72, June.
- Pierre Dupraz & Karine Latouche & Nadine Turpin, 2009. "Threshold effect and co-ordination of agri-environmental efforts," Journal of Environmental Planning and Management, Taylor & Francis Journals, vol. 52(5), pages 613-630.
- Charles Perrings & David Pearce, 1994. "Threshold effects and incentives for the conservation of biodiversity," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 4(1), pages 13-28, February.
- Muradian, Roldan, 2001. "Ecological thresholds: a survey," Ecological Economics, Elsevier, vol. 38(1), pages 7-24, July.
- Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
- Therese Lindahl & Magnus Johannesson, 2009. "Bargaining over a Common Good with Private Information," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(3), pages 547-565, 09.
- Sandler, Todd & Sternbenz, Frederic P., 1990. "Harvest uncertainty and the tragedy of the commons," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages 155-167, March.
- Boucher, Vincent & Bramoullé, Yann, 2010. "Providing global public goods under uncertainty," Journal of Public Economics, Elsevier, vol. 94(9-10), pages 591-603, October.
- Yann Bramoullé & Nicolas Treich, 2009. "Can Uncertainty Alleviate the Commons Problem?," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1042-1067, 09.
- Brozovic, Nicholas & Schlenker, Wolfram, 2011. "Optimal management of an ecosystem with an unknown threshold," Ecological Economics, Elsevier, vol. 70(4), pages 627-640, February.
- David Malueg, 2010. "Mixed-strategy equilibria in the Nash Demand Game," Economic Theory, Springer, vol. 44(2), pages 243-270, August.
- Andre, Catherine & Platteau, Jean-Philippe, 1998. "Land relations under unbearable stress: Rwanda caught in the Malthusian trap," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 1-47, January.
- Levin, Jonathan, 1997. "An Optimal Auction for Complements," Games and Economic Behavior, Elsevier, vol. 18(2), pages 176-192, February.
When requesting a correction, please mention this item's handle: RePEc:iea:carech:1101. 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.