Strategic exploitation of a common-property resource under uncertainty

We construct a game of noncooperative common-resource exploitation which delivers analytical solutions for its symmetric Markov-perfect Nash equilibrium. We examine how introducing uncertainty to the natural law of resource reproduction affects strategic exploitation. We show that the commons proble...

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Bibliographic Details
Published in:Journal of environmental economics and management 2013-01, Vol.65 (1), p.28-39
Main Authors: Antoniadou, Elena, Koulovatianos, Christos, Mirman, Leonard J.
Format: Article
Language:English
Subjects:
Environmental economics
Environmental management
Exploitation
Game theory
Linear models
Markov analysis
Nash equilibrium
Renewable resource exploitation
Renewable resources
Resource management
Risk management
Stochastic non-cooperative dynamic games
Studies
The commons
Uncertainty
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Summary:We construct a game of noncooperative common-resource exploitation which delivers analytical solutions for its symmetric Markov-perfect Nash equilibrium. We examine how introducing uncertainty to the natural law of resource reproduction affects strategic exploitation. We show that the commons problem is always present in our example and we identify cases in which increases in risk amplify or mitigate the commons problem. For a specific class of games which imply Markov-perfect strategies that are linear in the resource stock (our example belongs to this class), we provide general results on how payoff-function features affect the responsiveness of exploitation strategies to changes in riskiness. These broader characterizations of games which imply linear strategies (appearing in an Online Appendix) can be useful in future work, given the technical difficulties that may arise from the possible nonlinearity of Markov-perfect strategies in more general settings. ► We study dynamic games of common-property resource exploitation under uncertainty. ► We introduce random disturbances in the natural law of resource reproduction. ► An analytical example identifies how increasing risk affects the commons problem. ► Properties of players' payoff functions critically affect this linkup in our example. ► This role of payoffs holds in all games that imply linear Markov-perfect strategies.
ISSN:0095-0696
1096-0449
DOI:10.1016/j.jeem.2012.05.005