The Dynamic Efficiency Costs of Common-Pool Resource Exploitation

Ling Huang and Martin Smith ()

American Economic Review, 2014, vol. 104, issue 12, 4071-4103

Abstract: We conduct the first empirical investigation of common-pool resource users' dynamic and strategic behavior at the micro level using real-world data. Fishermen's strategies in a fully dynamic game account for latent resource dynamics and other players' actions, revealing the profit structure of the fishery. We compare the fishermen's actual and socially optimal exploitation paths under a time-specific vessel allocation policy and find a sizable dynamic externality. Individual fishermen respond to other users by exerting effort above the optimal level early in the season. Congestion is costly instantaneously but is beneficial in the long run because it partially offsets dynamic inefficiencies. (JEL D24, Q21, Q22)

JEL-codes: D24 Q21 Q22 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.12.4071
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