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On the optimal taxation of common-pool resources

Kossioris, G., Plexousakis, M., Xepapadeas, A., de Zeeuw, A. Journal of Economic Dynamics and Control (2011), Volume 35, Issue 11, Pages 1868-1879

Abstract:

Recent research developments in common-pool resource models emphasize the importance of links with ecological systems and the presence of non-linearities, thresholds and multiple steady states.In a recentpaper Kossiorisetal.(2008) develop a methodology for deriving feedback Nash equilibria for non-linear differential games and apply this methodology to a common-pool resource model of a lake where pollution corresponds to benefits and at the same time affects the ecosystem services. This paper studies the structure of optimal state-dependent taxes that steer the combined economic-ecological system towards the trajectory of optimal management, and provides an algorithm for calculating such taxes.

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Keywords: Differential games, Non-linear feedback, Nash equilibria, Ecosystems, Optimal state-dependent tax

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