Time-consistent resource management with regime shifts

We investigate how a resource user who is present-biased manages a renewable resource stock with variable growth that could undergo a reversible regime shift (an abrupt, persistent change in structure and function of the ecosystem supplying the resource). In a discrete-time quasihyperbolic discounting framework with no commitment device, and using only generic utility functions and stock transition with regime shifts, we show that there is…

Potential disasters can turn the tragedy into success

This paper presents a novel experimental design that allows testing how users of a common-pool resource respond to an endogenously driven drastic drop in the supply of the resource. We show that user groups will manage a resource more efficiently when confronted with such a non-concave resource growth function, compared to groups facing a logistic growth function. Even among cooperative groups there is a significant…

Managing renewable resources facing the risk of regime shifts

Resource management has to take account of the possibility of regime shifts in the ecological system that provides the resource. Regime shifts are uncertain and lead to structural changes in the system dynamics, lowering the productivity of the resource. Optimal management is driven by two considerations. First, it becomes more precautionary in case a higher stock of the renewable resource decreases the hazard rate of…

Optimal harvesting of stochastic spatial resources

We characterize the optimal harvest of a renewable resource in a generalized stochastic spatially explicit model. Despite the complexity of the model, we are able to obtain sharp analytical results. We find that the optimal harvest rule in general depends upon dispersal patterns of the resource across space, and only in special circumstances do we find a modified golden rule of growth that is independent…

Cooperation in the commons with unobservable actions

We model a dynamic common property resource game with unobservable actions and non-linear stock-dependent costs. We propose a strategy profile that generates a worst perfect equilibrium in the punishment phase, thereby supporting cooperation under the widest set of conditions. We show under what set of parameter values for the discount rate, resource growth rate, harvest price, and the number of resource users, this strategy supports…

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