The Dynamic Efficiency Costs of Common-Pool Resource Exploitation
American Economic Review
vol. 104,
no. 12, December 2014
(pp. 4071-4103)
Abstract
We conduct the first empirical investigation of common-pool resource users' dynamic and strategic behavior at the micro level using real-world data. Fishermen's strategies in a fully dynamic game account for latent resource dynamics and other players' actions, revealing the profit structure of the fishery. We compare the fishermen's actual and socially optimal exploitation paths under a time-specific vessel allocation policy and find a sizable dynamic externality. Individual fishermen respond to other users by exerting effort above the optimal level early in the season. Congestion is costly instantaneously but is beneficial in the long run because it partially offsets dynamic inefficiencies. (JEL D24, Q21, Q22)Citation
Huang, Ling, and Martin D. Smith. 2014. "The Dynamic Efficiency Costs of Common-Pool Resource Exploitation." American Economic Review, 104 (12): 4071-4103. DOI: 10.1257/aer.104.12.4071Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- Q21 Renewable Resources and Conservation: Demand and Supply; Prices
- Q22 Renewable Resources and Conservation: Fishery; Aquaculture