Spatial dynamics and optimal resource extraction
Pamela Giselle Katic
Centre for Water Economics, Environment and Policy Papers from Centre for Water Economics, Environment and Policy, Crawford School of Public Policy, The Australian National University
Extraction from a common pool resource may result in a divergence between competitive and optimal rates of extraction. This paper develops a theoretical model to estimate the size of the payoffs from this divergence under alternative spatial representations. Results show that when a resource is heterogeneously distributed spatially, assuming a spatially homogeneous distribution can underestimate the losses with competitive extraction. An application of the model to a real-world aquifer shows the importance of recognizing spatial heterogeneity in resource extraction problems to: (1) provide robust estimates of the costs of sub-optimal extraction and; (2) implement appropriate corrective policies.
Keywords: spatial dynamics; common pool resources; externalities; groundwater extraction (search for similar items in EconPapers)
JEL-codes: Q20 Q25 Q30 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:een:cweanu:1002
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