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Information structure and the tragedy of the commons in resource extraction

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  • AMIR, Rabah
  • NANNERUP, Niels

Abstract

This paper considers the well-known Levhari-Mirman model of resource extraction, and investigates the effects of the information structure of the dynamic game - open-loop, Markovian or history-dependent - on the equilibrium consumption path and the overall utility of the agents. The open-loop regime yields a Pareto-optimal outcome. The Markovian regime leads to the most pronounced version of the tragedy of the commons. History-dependent behavior yields an outcome set that is intermediate between the other two cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information extraction strategies are based on. The analysis suggests that in environments characterized by a dynamic (and no market) externality, forcing agents to commit to open-loop behavior would constitute welfare-improving regulation.

Suggested Citation

  • AMIR, Rabah & NANNERUP, Niels, 2004. "Information structure and the tragedy of the commons in resource extraction," LIDAM Discussion Papers CORE 2004040, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2004040
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    1. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
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    Cited by:

    1. Alejandra Fonseca-Morales & Onésimo Hernández-Lerma, 2018. "Potential Differential Games," Dynamic Games and Applications, Springer, vol. 8(2), pages 254-279, June.
    2. AMIR, Rabah, 2001. "Stochastic games in economics and related fields: an overview," LIDAM Discussion Papers CORE 2001060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Agah R. Turan, 2019. "Intentional time inconsistency," Theory and Decision, Springer, vol. 86(1), pages 41-64, February.
    4. David González-Sánchez & Onésimo Hernández-Lerma, 2014. "Dynamic Potential Games: The Discrete-Time Stochastic Case," Dynamic Games and Applications, Springer, vol. 4(3), pages 309-328, September.

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    More about this item

    Keywords

    dynamic resource games; open-loop; closed-loop and trigger strategies; Pareto optimality; regulation;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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