Information structure and the tragedy of the commons in resource extraction

Rabah Amir () and Niels Nannerup

No 2004040, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper considers the well-known Levhari-Mirman model of resource extraction, and investigates the effects of the information structure of the dynamic game - open-loop, Markovian or history-dependent - on the equilibrium consumption path and the overall utility of the agents. The open-loop regime yields a Pareto-optimal outcome. The Markovian regime leads to the most pronounced version of the tragedy of the commons. History-dependent behavior yields an outcome set that is intermediate between the other two cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information extraction strategies are based on. The analysis suggests that in environments characterized by a dynamic (and no market) externality, forcing agents to commit to open-loop behavior would constitute welfare-improving regulation.

Keywords: dynamic resource games; open-loop; closed-loop and trigger strategies; Pareto optimality; regulation (search for similar items in EconPapers)
JEL-codes: C73 Q20 (search for similar items in EconPapers)
Date: 2004-06
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Related works:
Journal Article: Information Structure and the Tragedy of the Commons in Resource Extraction (2006)
Working Paper: Information Structure and the Tragedy of the Commons in Resource Extraction (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2004040

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