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Information Structure and the Tragedy of the Commons in Resource Extraction

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This paper considers the well-known Levhari-Mirman discrete-time 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. Due to the special structure of the model, 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, and that may include the Pareto-optimal outcome in some cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information the agents’ 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.

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Authors and Affiliations

  1. CORE, University of Louvain, 34 Voie du Roman Pays, 1348, Louvain-la-Neuve, Belgium

    Rabah Amir

  2. Department of Economics, University of Southern Denmark, 5230, Odense M, Denmark

    Niels Nannerup

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  1. Rabah Amir
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  2. Niels Nannerup
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Correspondence to Rabah Amir.

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Amir, R., Nannerup, N. Information Structure and the Tragedy of the Commons in Resource Extraction. J Bioecon 8, 147–165 (2006). https://doi.org/10.1007/s10818-006-9001-2

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  • DOI: https://doi.org/10.1007/s10818-006-9001-2

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