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Option Fund Market Dynamics for Threshold Public Goods

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  • Arnaud Dragicevic

    (Chaire Forêts pour Demain, AgroParisTech-Office National des Forêts)

Abstract

Economic agents have the possibility to fund the protection of environmental public goods, such as natural ecosystems and biodiversity, facing unknown risks of collapse, which could help to back them up. On the base of the prediction markets, which meet with a degree of success since their introduction, we propose an evolutionary model of an option fund market for the threshold environmental public goods. We consider population dynamics of agents distributed into proportional fair-share contributors and free-riders. The model outcomes show that the public goods could be provided when the agents exchanging option contracts are equally divided into buyers and sellers. This result only holds for a specific social belief over the probability of the public good safeguard, the strict equality between bids and asks, and the equality of all payoffs. Otherwise, providing public goods through option markets turns out to be inoperative.

Suggested Citation

  • Arnaud Dragicevic, 2015. "Option Fund Market Dynamics for Threshold Public Goods," Working Papers - Cahiers du LEF 2015-12, Laboratoire d'Economie Forestiere, AgroParisTech-INRA, revised Dec 2015.
    • Handle: RePEc:lef:wpaper:2015-12
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    File URL: http://www6.nancy.inra.fr/lef/Cahiers-du-LEF/2015/2015-12
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    References listed on IDEAS

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    Cited by:

    1. Arnaud Z. Dragicevic, 2021. "Emergence and Dynamics of Short Food Supply Chains," Networks and Spatial Economics, Springer, vol. 21(1), pages 31-55, March.
    2. Zhong, Li-Xin & Xu, Wen-Juan & He, Yun-Xin & Zhong, Chen-Yang & Chen, Rong-Da & Qiu, Tian & Shi, Yong-Dong & Ren, Fei, 2017. "A generalized public goods game with coupling of individual ability and project benefit," Chaos, Solitons & Fractals, Elsevier, vol. 101(C), pages 73-80.

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    More about this item

    Keywords

    bioeconomics; evolutionary game theory; random-matching; uncertainty; prediction markets; conservation banking.;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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