A dynamic common property resource problem with amenity value and extraction costs

Gerhard Sorger

International Journal of Economic Theory, 2005, vol. 1, issue 1, 3-19

Abstract: An analytically tractable differential game is presented that describes the exploitation of a common‐property resource by finitely many competing players. The resource stock has an amenity value and there are positive extraction costs. We derive both the cooperative solution and Markov‐perfect Nash equilibria of the non‐cooperative game. After a comparative analysis of the equilibrium strategies and payoffs with respect to all model parameters, we study the effect of a unilateral extraction restriction and discuss the design of a revenue‐neutral tax/transfer scheme that supports the cooperative solution.

Date: 2005
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