A Free Lunch in the Commons
We derive conditions under which cost-increasing measures - consistent with either regulatory constraints or fully expropriated taxes - can increase the profits of all agents active within a common-pool resource. This somewhat counterintuitive result is possible regardless of whether price is exogenously fixed or endogenously determined. Consumers are made no worse-off and, in the case of an endogenous price, can be made strictly better-off. The results simply require that total revenue be decreasing and convex in aggregate effort, which is an entirely reasonable condition, as we demonstrate in the context of a renewable natural resource. We also show that our results are robust to heterogeneity of agents and, under certain conditions, to costless entry and exit. Finally, we generalize the analysis to show its relation to earlier work on the effects of raising costs in a model of Cournot oligopoly.
|Date of creation:||Jun 2009|
|Date of revision:|
|Publication status:||published as Kotchen, Matthew J. & Salant, Stephen W., 2011. "A free lunch in the commons," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 245-253, May.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
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.:
- Baumol,William J. & Oates,Wallace E., 1988.
"The Theory of Environmental Policy,"
Cambridge University Press, number 9780521311120, November.
- Karen Palmer & Wallace E. Oates & Paul R. Portney, 1995. "Tightening Environmental Standards: The Benefit-Cost or the No-Cost Paradigm?," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 119-132, Fall.
- Chung, Tai-Yeong, 1996. "Rent-Seeking Contest When the Prize Increases with Aggregate Efforts," Public Choice, Springer, vol. 87(1-2), pages 55-66, April.
- Heintzelman, Martin D. & Salant, Stephen W. & Schott, Stephan, 2009.
"Putting free-riding to work: A Partnership Solution to the common-property problem,"
Journal of Environmental Economics and Management,
Elsevier, vol. 57(3), pages 309-320, May.
- Heintzelman, Martin & Salant, Stephen W. & Schott, Stephan, 2008. "Putting Free-Riding to Work: A Partnership Solution to the Common-Property Problem," MPRA Paper 9804, University Library of Munich, Germany.
- Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
- Baye, Michael R. & Hoppe, Heidrun C., 2003. "The strategic equivalence of rent-seeking, innovation, and patent-race games," Games and Economic Behavior, Elsevier, vol. 44(2), pages 217-226, August.
- Baik, Kyung Hwan & Lee, Sanghack, 2001. "Strategic Groups and Rent Dissipation," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 672-84, October.
- Tarui, Nori & Mason, Charles F. & Polasky, Stephen & Ellis, Greg, 2008.
"Cooperation in the commons with unobservable actions,"
Journal of Environmental Economics and Management,
Elsevier, vol. 55(1), pages 37-51, January.
- Nori Tarui & Charles Mason & Stephen Polasky & Greg Ellis, 2007. "Cooperation in the Commons with Unobservable Actions," Working Papers 200711, University of Hawaii at Manoa, Department of Economics.
- Stephen Polasky & Nori Tarui & Gregory Ellis & Charles Mason, 2006. "Cooperation in the commons," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(1), pages 71-88, September.
- Nitzan, Shmuel, 1991. "Collective Rent Dissipation," Economic Journal, Royal Economic Society, vol. 101(409), pages 1522-34, November.
- Theodore C. Bergstrom & Hal R. Varian, 1985. "When Are Nash Equilibria Independent of the Distribution of Agents' Characteristics?," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 715-718.
- H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62, pages 124.
- Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414 Elsevier.
- Cheung, Steven N S, 1970. "The Structure of a Contract and the Theory of a Non-exclusive Resource," Journal of Law and Economics, University of Chicago Press, vol. 13(1), pages 49-70, April.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:15086. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.