A dynamic common property resource problem with amenity value and extraction costs |
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Authors: | Gerhard Sorger |
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Affiliation: | Department of Economics, University of Vienna, Vienna, Austria. Email: |
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Abstract: | An analytically tractable differential game is presented that describes the exploitation of a common-property resource by finitely many competing players. The resource stock has an amenity value and there are positive extraction costs. We derive both the cooperative solution and Markov-perfect Nash equilibria of the non-cooperative game. After a comparative analysis of the equilibrium strategies and payoffs with respect to all model parameters, we study the effect of a unilateral extraction restriction and discuss the design of a revenue-neutral tax/transfer scheme that supports the cooperative solution. |
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Keywords: | tragedy of the commons Markov-perfect Nash equilibrium unilateral extraction restriction corrective tax/transfer scheme |
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