Pattern Formation, Spatial Externalities and Regulation in Coupled Economic-Ecological Systems

53 Pages Posted: 12 Jun 2008

See all articles by William A. Brock

William A. Brock

University of Wisconsin, Madison - Department of Economics; University of Missouri at Columbia - Department of Economics

Anastasios Xepapadeas

Athens University of Economics and Business; University of Bologna - School of Economics, Management, and Statistics

Date Written: May 17, 2008

Abstract

We develop a novel theoretical framework for studying ecosystems in which interacting state variables which are affected by management decisions diffuse in space. We identify (i) mechanisms creating spatial patterns when economic agents maximize profit at each site by ignoring the impact of their actions on other sites and (ii) a diffusion induced externality. Pattern formation mechanisms and externalities create a divergence in the spatiotemporal structures emerging under private or social objectives We develop optimal regulation which internalize the spatiotemporal externalities. Our theory is applied to the management and regulation of a semi-arid system. Supporting numerical simulations are also presented.

Keywords: Economic-Ecological Systems, Pattern Formation, Reaction-Diffusion, Diffusion Instability, Spatial Externalities, Regulation

JEL Classification: Q20, C61, H23

Suggested Citation

Brock, William A. and Xepapadeas, Anastasios, Pattern Formation, Spatial Externalities and Regulation in Coupled Economic-Ecological Systems (May 17, 2008). Available at SSRN: https://ssrn.com/abstract=1144071 or http://dx.doi.org/10.2139/ssrn.1144071

William A. Brock

University of Wisconsin, Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States
608-263-6655 (Phone)
608-263-3876 (Fax)

University of Missouri at Columbia - Department of Economics ( email )

118 Professional Building
Columbia, MO 65211
United States

Anastasios Xepapadeas (Contact Author)

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

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