A Market Mechanism for Sustainable and Efficient Resource Use under Uncertainty

Martin Quaas and Ralph Winkler

No 6524, CESifo Working Paper Series from CESifo

Abstract: Sustainability and efficiency are potentially conflicting social objectives in natural resource management. We propose a market mechanism to allocate use rights over a stochastic resource to private managers. The mechanism endogenously determines the maximal tenure length guaranteeing that the sustainability goal is obeyed for sure over the entire period. In addition, the mechanism achieves efficiency, i.e. it maximizes the expected present value of resource rents that accrue to society. Potential applications include improved fishing agreements between developing countries and distant-water fishing fleets.

Keywords: auctioning-refunding-mechanism; efficient resource allocation; renewable resources; stochastic resource dynamics; sustainability (search for similar items in EconPapers)
JEL-codes: D44 D82 Q20 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-des, nep-ene and nep-env
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