IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Market for Conservation and Other Hostages

Author Info

Listed author(s):
  • Bård Harstad

Abstract

A conservation good, such as the rainforest, is a hostage: it is possessed by S who may prefer to consume it, but B receives a larger value from continued conservation. A range of prices would make trade mutually beneficial. So, why doesn't B purchase conservation, or the forest, from S? If this were an equilibrium, S would never consume, anticipating a higher price at the next stage. Anticipating this, B prefers to deviate and not pay. The Markov-perfect equilibria are in mixed strategies, implying that the good is consumed (or the forest is cut) at a positive rate. If conservation is more valuable, it is less likely to occur. If there are several interested buyers, cutting increases. If S sets the price and players are patient, the forest disappears with probability one. A rental market has similar properties. By comparison, a rental market dominates a sale market if the value of conservation is low, the consumption value high, and if remote protection is costly. Thus, the theory can explain why optimal conservation does not always occur and why conservation abroad is rented, while domestic conservation is bought.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/papers/w17409.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17409.

as
in new window

Length:
Date of creation: Sep 2011
Publication status: published as Bård Harstad, 2016. "The market for conservation and other hostages," Journal of Economic Theory, .
Handle: RePEc:nbr:nberwo:17409
Note: EEE LE PE POL
Contact details of provider: Postal:
National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

Keywords:

Other versions of this item:

Find related papers by JEL classification:
  • D62 - Microeconomics - - Welfare Economics - - - Externalities
  • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
  • F5 - International Economics - - International Relations, National Security, and International Political Economy
  • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
  • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
  • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
  • Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Issues in International Trade
  • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
  • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:

as
in new window


  1. Bohm Peter, 1993. "Incomplete International Cooperation to Reduce CO2 Emissions: Alternative Policies," Journal of Environmental Economics and Management, Elsevier, vol. 24(3), pages 258-271, May.
  2. repec:dau:papers:123456789/12984 is not listed on IDEAS
  3. Jehiel, Philippe & Moldovanu, Benny, 1995. "Negative Externalities May Cause Delay in Negotiation," Econometrica, Econometric Society, vol. 63(6), pages 1321-1335, November.
  4. Johnson, Justin P & Waldman, Michael, 2003. " Leasing, Lemons, and Buybacks," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 247-265, Summer.
  5. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, July.
  6. Mason, Charles F. & Plantinga, Andrew J., 2013. "The additionality problem with offsets: Optimal contracts for carbon sequestration in forests," Journal of Environmental Economics and Management, Elsevier, vol. 66(1), pages 1-14.
  7. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954, April.
  8. Hendon, Ebbs & Tranaes, Torben, 1991. "Sequential bargaining in a market with one seller and two different buyers," Games and Economic Behavior, Elsevier, vol. 3(4), pages 453-466, November.
  9. Bergin James & MacLeod W. Bentley, 1993. "Efficiency and Renegotiation in Repeated Games," Journal of Economic Theory, Elsevier, vol. 61(1), pages 42-73, October.
  10. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, Diciembre.
  11. Genicot, Garance & Ray, Debraj, 2006. "Contracts and externalities: How things fall apart," Journal of Economic Theory, Elsevier, vol. 131(1), pages 71-100, November.
  12. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, vol. 86(4), pages 814-829, September.
  13. Bård Harstad, 2011. "The Market for Conservation and Other Hostages," NBER Working Papers 17409, National Bureau of Economic Research, Inc.
  14. Farrell, Joseph, 1987. "Information and the Coase Theorem," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 113-129, Fall.
  15. Robin Burgess & Matthew Hansen & Benjamin A. Olken & Peter Potapov & Stefanie Sieber, 2012. "The Political Economy of Deforestation in the Tropics," The Quarterly Journal of Economics, Oxford University Press, vol. 127(4), pages 1707-1754.
  16. Luca Anderlini & Leonardo Felli, 2006. "Transaction Costs and the Robustness of the Coase Theorem," Economic Journal, Royal Economic Society, vol. 116(508), pages 223-245, 01.
  17. Damette, Olivier & Delacote, Philippe, 2012. "On the economic factors of deforestation: What can we learn from quantile analysis?," Economic Modelling, Elsevier, vol. 29(6), pages 2427-2434.
  18. Brian R. Copeland & M. Scott Taylor, 2009. "Trade, Tragedy, and the Commons," American Economic Review, American Economic Association, vol. 99(3), pages 725-749, June.
  19. Philippe Jehiel & Benny Moldovanu, 1999. "Resale Markets and the Assignment of Property Rights," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 971-991.
  20. Benoit, Jean-Pierre & Krishna, Vijay, 1993. "Renegotiation in Finitely Repeated Games," Econometrica, Econometric Society, vol. 61(2), pages 303-323, March.
  21. Hans-Werner Sinn, 2009. "The Green Paradox," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(3), pages 10-13, October.
  22. Philippe Delacote & Gabriela Simonet, 2013. "Readiness and Avoided deforestation policies: on the use of the REDD fund," Working Papers 1312, Chaire Economie du climat.
  23. Björnerstedt, Jonas & Westermark, Andreas, 2009. "Stationary equilibria in bargaining with externalities," Games and Economic Behavior, Elsevier, vol. 65(2), pages 318-338, March.
  24. Dixit, Avinash & Olson, Mancur, 2000. "Does voluntary participation undermine the Coase Theorem?," Journal of Public Economics, Elsevier, vol. 76(3), pages 309-335, June.
  25. Groes, Ebbe & Tranaes, Torben, 1999. "On the Efficiency of Decentralized Exchange with Resale Possibilities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 423-438, May.
  26. Abrea Dilip & Pearce David & Stacchetti Ennio, 1993. "Renegotiation and Symmetry in Repeated Games," Journal of Economic Theory, Elsevier, vol. 60(2), pages 217-240, August.
  27. Lapan, Harvey E & Sandler, Todd, 1988. "To Bargain or Not to Bargain: That Is the Question," American Economic Review, American Economic Association, vol. 78(2), pages 16-21, May.
  28. Lee J. Alston & Krister Andersson, 2011. "Reducing Greenhouse Gas Emissions by Forest Protection: The Transaction Costs of REDD," NBER Working Papers 16756, National Bureau of Economic Research, Inc.
  29. Maskin, Eric & Tirole, Jean, 2001. "Markov Perfect Equilibrium: I. Observable Actions," Journal of Economic Theory, Elsevier, vol. 100(2), pages 191-219, October.
  30. Engel, Stefanie & Pagiola, Stefano & Wunder, Sven, 2008. "Designing payments for environmental services in theory and practice: An overview of the issues," Ecological Economics, Elsevier, vol. 65(4), pages 663-674, May.
  31. Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
  32. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
  33. Philippe Jehiel & Benny Moldovanu, 1995. "Cyclical Delay in Bargaining with Externalities," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 619-637.
  34. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
  35. Hans-Werner Sinn, 2007. "Public Policies against Global Warming," NBER Working Papers 13454, National Bureau of Economic Research, Inc.
  36. Asheim, Geir B., 1991. "Extending renegotiation-proofness to infinite horizon games," Games and Economic Behavior, Elsevier, vol. 3(3), pages 278-294, August.
  37. Oliver D. Hart & Jean Tirole, 1988. "Contract Renegotiation and Coasian Dynamics," Review of Economic Studies, Oxford University Press, vol. 55(4), pages 509-540.
  38. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
  39. Justin P. Johnson & Michael Waldman, 2010. "Leasing, Lemons, and Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 307-328, 05.
  40. Douglas Bernheim, B. & Ray, Debraj, 1989. "Collective dynamic consistency in repeated games," Games and Economic Behavior, Elsevier, vol. 1(4), pages 295-326, December.
  41. 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.
  42. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, April.
  43. Ellingsen, Tore & Paltseva, Elena, 2012. "The private provision of excludable public goods: An inefficiency result," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 658-669.
  44. Bård Harstad, 2012. "Buy Coal! A Case for Supply-Side Environmental Policy," Journal of Political Economy, University of Chicago Press, vol. 120(1), pages 77-115.
  45. Sandler, Todd & Arce, Daniel G., 2007. "Terrorism: A Game-Theoretic Approach," Handbook of Defense Economics, Elsevier.
  46. Ilya Segal & Michael D. Whinston, 2003. "Robust Predictions for Bilateral Contracting with Externalities," Econometrica, Econometric Society, vol. 71(3), pages 757-791, 05.
  47. Smith, Clifford W, Jr & Wakeman, L MacDonald, 1985. " Determinants of Corporate Leasing Policy," Journal of Finance, American Finance Association, vol. 40(3), pages 895-908, July.
  48. Mann, Duncan P., 1992. "Durable goods monopoly and maintenance," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 65-79, March.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:

  1. Suzi C. Kerr, 2013. "The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 7(1), pages 47-66, January.
  2. Frederick van der Ploeg, 2013. "Cumulative Carbon Emissions and the Green Paradox," Annual Review of Resource Economics, Annual Reviews, vol. 5(1), pages 281-300, June.
  3. Georgy Egorov & Bård Harstad, 2013. "Private Politics and Public Regulation," NBER Working Papers 19737, National Bureau of Economic Research, Inc.
  4. Bård Harstad, 2011. "The Market for Conservation and Other Hostages," NBER Working Papers 17409, National Bureau of Economic Research, Inc.
  5. May, Peter H. & Soares-Filho, Britaldo Silveira & Strand, Jon, 2013. "How much is the Amazon worth ? the state of knowledge concerning the value of preserving amazon rainforests," Policy Research Working Paper Series 6668, The World Bank.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:17409. 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: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.