Strategic Exploitation of a Common Resource under Environmental Risk

Posted: 3 Dec 2009 Last revised: 28 Jan 2014

Eric Fesselmeyer

National University of Singapore (NUS) - Department of Economics

Marc Santugini

University of Virginia - Department of Economics

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Abstract

We study the effect of environmental risk on the extraction of a common resource. Using a dynamic and non-cooperative game in which an environmental event impacts the renewability and the quality of the resource, we show that the anticipation of such an event has an ambiguous effect on extraction and the tragedy of the commons. A risk of a reduction in the renewability induces the agents to extract less today while a risk of a deterioration in the quality has the opposite effect. Moreover, when environmental risk induces conservation, the tragedy of the commons is worsened.

Keywords: Conservation, Dynamic games, Environmental risk, Renewable resources, Tragedy of the Commons

JEL Classification: C72, C73, D43, D90, L13, O13, Q20, Q54

Suggested Citation

Fesselmeyer, Eric and Santugini, Marc, Strategic Exploitation of a Common Resource under Environmental Risk. Journal of Economic Dynamics and Control, Vol. 37, No. 1, 2013. Available at SSRN: https://ssrn.com/abstract=1516655 or http://dx.doi.org/10.2139/ssrn.1516655

Eric Fesselmeyer

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

Marc Santugini (Contact Author)

University of Virginia - Department of Economics ( email )

P.O. Box 400182
Charlottesville, VA 22904-4182
United States

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