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Dynamic Mechanism Design for a Global Commons

  • Rodrigo Harrison
  • Roger Lagunoff

We model dynamic mechanisms for a global commons. Countries benefit from both consumption and aggregate conservation of an open access resource. A country's relative value of consumption-to-conservation is privately observed and evolves stochastically. An optimal quota maximizes world welfare subject to being implementable by Perfect Bayesian equilibria. With complete information, the optimal quota is first best; it allocates more of the resource each period to countries with high consumption value. Under incomplete information, the optimal quota is fully compressed - initially identical countries always receive the same quota even as environmental costs and resource needs differ later on.

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Paper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 442.

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Date of creation: 2013
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Handle: RePEc:ioe:doctra:442
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  1. Sébastien ROUILLON (GREThA UMR CNRS 5113), 2010. "Optimal decentralized management of a natural resource," Cahiers du GREThA 2010-15, Groupe de Recherche en Economie Théorique et Appliquée.
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  8. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  9. Roberts, Kevin, 1984. "The Theoretical Limits of Redistribution," Review of Economic Studies, Wiley Blackwell, vol. 51(2), pages 177-95, April.
  10. Dutta, Prajit K. & Radner, Roy, 2009. "A strategic analysis of global warming: Theory and some numbers," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 187-209, August.
  11. Marco Battaglini & Bård Harstad, 2012. "Participation and Duration of Environmental Agreements," NBER Working Papers 18585, National Bureau of Economic Research, Inc.
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