Strategic Exploitation of a Common-Property Resource Under Rational Learning About its Reproduction

Christos Koulovatianos

DEM Discussion Paper Series from Department of Economics at the University of Luxembourg

Abstract: We build a workable game of common-property resource extraction under rational Bayesian learning about the reproduction prospects of a resource. We focus on Markov-perfect strate- gies under truthful revelation of beliefs. For reasonable initial conditions, exogenously shif- ting the prior beliefs of one player towards more pressimism about the potential of natural resources to reproduce, can create anti-conservation incentives. The single player whose be- liefs have been shifted towards mor pessimism exhibits higher exploitation rate than before. In response, all other players reduce their exploitation rates in order to conserve the resource. However, the overall conservation incentive is weak, making the aggregate exploitation rate higher than before the pessimistic shift in beliefs of that single player. Due to this weakness in strategic conservation responses, if the number of players is relatively small, then in cases with common priors, jointly shifting all players' beliefs more pessimism exacerbates the commons problem.

Keywords: renewable resources; resource exploitation; non-cooperative dynamic games; Bayesian learning; stochstic games; commons; rational learning; uncertainty; beliefs (search for similar items in EconPapers)
JEL-codes: C72 C73 D83 D84 L70 O13 Q20 Q50 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cta, nep-env and nep-gth
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Journal Article: Strategic Exploitation of a Common-Property Resource Under Rational Learning About its Reproduction (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:luc:wpaper:14-06

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