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When is it Optimal to Exhaust a Resource in a Finite Time?

Author

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  • Y. Hossein Farzin

    (University of California)

  • Ken-Ichi Akao

    (Waseda University)

Abstract

Exhaustion of a natural resource stock may be a rational choice for an individual and/or a community, even if a sustainable use for the resource is feasible and the resource users are farsighted and well informed on the ecosystem. We identify conditions under which it is optimal not to sustain resource use. These conditions concern the discounting of future benefits, instability of social system or ecosystem, nonconvexity of natural growth function, socio-psychological value of employment, and strategic interaction among resource users. The identification of these conditions can help design policies to prevent unsustainable patterns of resource use.

Suggested Citation

  • Y. Hossein Farzin & Ken-Ichi Akao, 2006. "When is it Optimal to Exhaust a Resource in a Finite Time?," Working Papers 2006.23, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2006.23
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    Cited by:

    1. Tsur, Yacov & Zemel, Amos, 2014. "Steady-state properties in a class of dynamic models," Journal of Economic Dynamics and Control, Elsevier, vol. 39(C), pages 165-177.
    2. Tsur, Yacov & Zemel, Amos, 2013. "Steady-state properties in a class of dynamic models, with applications to natural resource management," Discussion Papers 164511, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.

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    More about this item

    Keywords

    Renewable resource management; Sustainability; Finite-time exhaustion; Optimal path; Policy implications;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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