The Road to Extinction: Commons with Capital Markets

Jayasri Dutta () and Colin Rowat

No 04-11, Discussion Papers from Department of Economics, University of Birmingham

Abstract: We study extinction in a commons problem in which agents have access to capital markets. When the commons grows more quickly than the interest rate, multiple equilibria are found for intermediate commons endowments. In one of these, welfare decreases as the resource becomes more abundant, a `re- source curse'. As marginal extraction costs become constant, market access instantly depletes the commons. Without markets - the classic environment - equilibria are unique; extinction dates and welfare increase with the endow- ment. When the endowment is either very abundant or very scarce, market access improves welfare. As marginal costs of extraction from the commons become constant, market access can reduce welfare if the subjective discount rate exceeds the interest rate.

Keywords: commons; capital markets; perfect foresight; extinction; resource curse; storage (search for similar items in EconPapers)
JEL-codes: C73 D91 O17 Q21 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2004-04, Revised 2007-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://repec.cal.bham.ac.uk/pdf/04-11.pdf

Related works:
Working Paper: The road to extinction: Commons with Capital Markets (2005)
Working Paper: The road to extinction: commons with capital markets (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:04-11

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