IDEAS home Printed from https://ideas.repec.org/a/ses/arsjes/2005-iii-5.html
   My bibliography  Save this article

A Differential Game on the Management of Natural Capital subject to Emmissions from Industry Production

Author

Listed:
  • Magnus Hennlock

Abstract

A nonlinear differential game is developed with the industry and the government as two actors that act independently of each other with different objectives and different time preferences in the second best solution. The industry is concerned about the profit stream from the production of a consumption good when choosing the optimal path of investment rate in physical capital. The current emissions flow generated by production has negative long-run effects on the future renewable natural capital stock. The objectives of the government concern the industry profit stream as well as the evolution of the natural capital stock when choosing the optimal path of tax rate per unit emissions flow. Tax revenue is used for investments to restore and sustain the natural capital stock, which evolves according to a stochastic process. The subgame perfect feedback Nash equilibrium strategies for the industry investment rate and the government tax rate are identified and compared to the optimal controls in the first best solution.

Suggested Citation

  • Magnus Hennlock, 2005. "A Differential Game on the Management of Natural Capital subject to Emmissions from Industry Production," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(III), pages 411-436, September.
    • Handle: RePEc:ses:arsjes:2005-iii-5
    as

    Download full text from publisher

    File URL: http://www.sjes.ch/papers/2005-III-5.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. R. K. Turner & Kenneth Button & Peter Nijkamp (ed.), 1999. "Ecosystems and Nature," Books, Edward Elgar Publishing, number 1518.
    2. Clark, Colin W, 1973. "Profit Maximization and the Extinction of Animal Species," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 950-961, July-Aug..
    3. Arrow, Kenneth & Bolin, Bert & Costanza, Robert & Dasgupta, Partha & Folke, Carl & Holling, C.S. & Jansson, Bengt-Owe & Levin, Simon & Mäler, Karl-Göran & Perrings, Charles & Pimentel, David, 1996. "Economic growth, carrying capacity, and the environment," Environment and Development Economics, Cambridge University Press, vol. 1(1), pages 104-110, February.
    4. Timothy M. Swanson, 1994. "The Economics of Extinction Revisited and Revised," Palgrave Macmillan Books, in: The International Regulation of Extinction, chapter 3, pages 45-76, Palgrave Macmillan.
    5. Yeung, David W. K., 1998. "A class of differential games which admits a feedback solution with linear value functions," European Journal of Operational Research, Elsevier, vol. 107(3), pages 737-754, June.
    6. Veijo Kaitala & Matti Pohjola & Olli Tahvonen, 1992. "Transboundary air pollution and soil acidification: A dynamic analysis of an acid rain game between Finland and the USSR," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(2), pages 161-181, March.
    7. Swanson, Timothy M, 1994. "The Economics of Extinction Revisited and Revised: A Generalised Framework for the Analysis of the Problems of Endangered Species and Biodiversity Losses," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 800-821, Supplemen.
    8. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329.
    9. Clark, Colin W & Clarke, Frank H & Munro, Gordon R, 1979. "The Optimal Exploitation of Renewable Resource Stocks: Problems of Irreversible Investment," Econometrica, Econometric Society, vol. 47(1), pages 25-47, January.
    10. Sorger, Gerhard, 1989. "Competitive dynamic advertising : A modification of the Case game," Journal of Economic Dynamics and Control, Elsevier, vol. 13(1), pages 55-80, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Hennlock, Magnus, 2009. "Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment," RFF Working Paper Series dp-09-19, Resources for the Future.
    2. Hennlock, Magnus, 2009. "Robust Control in Global Warming Management: An Analytical Dynamic Integrated Assessment," Working Papers in Economics 354, University of Gothenburg, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander, Robert R. & Shields, David W., 2002. "Using Land As A Control Variable In Density-Dependent Bioeconomic Models," Discussion Papers in Natural Resource and Environmental Economics 23694, Massey University, Centre for Applied Economics and Policy Studies.
    2. Robert Innes & George Frisvold, 2009. "The Economics of Endangered Species," Annual Review of Resource Economics, Annual Reviews, vol. 1(1), pages 485-512, September.
    3. Ben White, 2000. "A Review of the Economics of Biological Natural Resources," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(3), pages 419-462, September.
    4. Fleming, Christopher M. & Alexander, Robert R., 2002. "The Economic Implications of a Multiple Species Approach to Bioeconomic Modelling," 2002 Conference (46th), February 13-15, 2002, Canberra, Australia 125082, Australian Agricultural and Resource Economics Society.
    5. Eppink, Florian V. & van den Bergh, Jeroen C.J.M., 2007. "Ecological theories and indicators in economic models of biodiversity loss and conservation: A critical review," Ecological Economics, Elsevier, vol. 61(2-3), pages 284-293, March.
    6. Alexander, Robert R. & Shields, David W., 1999. "Bioeconomic Modelling Of Endangered Species Conservation," Discussion Papers in Natural Resource and Environmental Economics 23692, Massey University, Centre for Applied Economics and Policy Studies.
    7. Birgit Bednar-Friedl & Edwin Muchapondwa & Precious Zikhali & Samson Mukanjari, 2012. "Evaluating the Prospects of Benefit Sharing Schemes in Protecting Mountain Gorillas in Central Africa," Working Papers 321, Economic Research Southern Africa.
    8. Foudi, Sébastien, 2012. "The role of farmers' property rights in soil ecosystem services conservation," Ecological Economics, Elsevier, vol. 83(C), pages 90-96.
    9. Sébastien Foudi, 2012. "Exploitation of soil biota ecosystem services in agriculture: a bioeconomic approach," Working Papers 2012-02, BC3.
    10. repec:clg:wpaper:2015-03 is not listed on IDEAS
    11. Alexander, Robert R., 2000. "Modelling species extinction: the case for non-consumptive values," Ecological Economics, Elsevier, vol. 35(2), pages 259-269, November.
    12. Bulte, Erwin H. & van Kooten, G. Cornelis, 2001. "Harvesting and conserving a species when numbers are low: population viability and gambler's ruin in bioeconomic models," Ecological Economics, Elsevier, vol. 37(1), pages 87-100, April.
    13. Troy Tassier, 2013. "Handbook of Research on Complexity, by J. Barkley Rosser, Jr. and Edward Elgar," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 39(1), pages 132-133.
    14. Naima Farah & John R Boyce, "undated". "Elephants and Mammoths," Working Papers 2015-26, Department of Economics, University of Calgary, revised 28 Jan 2016.
    15. FOUDI Sebastien, 2006. "Agriculture and Resource Exploitation: A Dynamic Bioeconomic Model of Agricultural Effort and Land Use Determination," LERNA Working Papers 06.25.218, LERNA, University of Toulouse.
    16. Antonio Doria, Francisco, 2011. "J.B. Rosser Jr. , Handbook of Research on Complexity, Edward Elgar, Cheltenham, UK--Northampton, MA, USA (2009) 436 + viii pp., index, ISBN 978 1 84542 089 5 (cased)," Journal of Economic Behavior & Organization, Elsevier, vol. 78(1-2), pages 196-204, April.
    17. Marggraf, R., 2001. "Wie effizient ist die Integration von naturschutzbezogenen Handelsbeschränkungen in die Regeln der WTO?," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 37.
    18. Squires, Dale & Vestergaard, Niels, 2013. "Technical change in fisheries," Marine Policy, Elsevier, vol. 42(C), pages 286-292.
    19. Nunes, P.A.L.D. & Nijkamp, P., 2011. "Biodiversity: Economic perspectives," Serie Research Memoranda 0002, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    20. Gerhard Sorger, 2005. "A dynamic common property resource problem with amenity value and extraction costs," International Journal of Economic Theory, The International Society for Economic Theory, vol. 1(1), pages 3-19, March.
    21. Smala Fanokoa, Pascaux & Telahigue, Issam & Zaccour, Georges, 2011. "Buying cooperation in an asymmetric environmental differential game," Journal of Economic Dynamics and Control, Elsevier, vol. 35(6), pages 935-946, June.

    More about this item

    Keywords

    Differential games; feedback Nash equilibrium; renewable natural resources; pollution; biodiversity;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ses:arsjes:2005-iii-5. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kurt Schmidheiny (email available below). General contact details of provider: https://edirc.repec.org/data/sgvssea.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.