A Free Lunch in the Commons

Stephen Salant and Matthew Kotchen

RFF Working Paper Series from Resources for the Future

Abstract: We derive conditions under which cost-increasing measures -- consistent with either regulatory constraints or fully expropriated taxes -- can increase the profits of all agents active within a common-pool resource. This somewhat counterintuitive result is possible regardless of whether price is exogenously fixed or endogenously determined. Consumers are made no worse off and, in the case of an endogenous price, can be made strictly better off. The results simply require that total revenue be decreasing and convex in aggregate effort, which is an entirely reasonable condition, as we demonstrate in the context of a renewable natural resource. We also show that our results are robust to heterogeneity of agents and, under certain conditions, to costless entry and exit. Finally, we generalize the analysis to show its relation to earlier work on the effects of raising costs in a model of Cournot oligopoly.

Date: 2009-08-05
New Economics Papers: this item is included in nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.rff.org/RFF/documents/RFF-DP-09-30.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.rff.org/RFF/documents/RFF-DP-09-30.pdf [301 Moved Permanently]--> https://www.rff.org/RFF/documents/RFF-DP-09-30.pdf)

Related works:
Journal Article: A free lunch in the commons (2011)
Working Paper: A Free Lunch in the Commons (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rff:dpaper:dp-09-30

Access Statistics for this paper

More papers in RFF Working Paper Series from Resources for the Future Contact information at EDIRC.
Bibliographic data for series maintained by Resources for the Future ().