Sustainability or ruin of a common resource economy with random jump

Masatoshi Fujisaki, Seiichi Katayama and Hiroshi Ohta
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Masatoshi Fujisaki: University of Hyogo, Japan
Seiichi Katayama: Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan
Hiroshi Ohta: Graduate School of International Cooperation Studies, Kobe University, Japan

No 178, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: We consider a common resource economy in which agents exploit the common resource, and use it to produce goods and consume the goods produced. Also the agents can invest in private and productive capital. The resource extracted from the common resource is non-renewable and the common pool is under unceratinty in the sense that it could have a sudden increase or decrease in the course of extraction. In this model we shall explore the probability of sustainability or ruin of the economy. We compare and discuss the optimal extraction rules and the probabilities under cooperative and non-cooperative regimes.

Keywords: Common property resource; Private capital accumulation; Pure jump process; Exhaustion probability; HJB (Hamilton-Jacobi-Bellman) equation (search for similar items in EconPapers)
JEL-codes: Q32 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2005-11
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