Journal article
Can incomplete information lead to under-exploitation in the commons?
Journal of environmental economics and management, Vol.62(3), pp.402-413
2011
Handle:
https://hdl.handle.net/2376/112614
Abstract
This paper analyzes the protection of a common pool resource (CPR) through the management of information. Specifically, we examine an entry deterrence model between an incumbent perfectly informed about the initial stock of a CPR and an uninformed potential entrant. In our model, the appropriation of the CPR by the incumbent reduces both players' future profits from exploiting the resource. In the case of complete information, we show that the incumbent operating in a high-stock common pool overexploits the CPR during the first period since it does not internalize the negative external effect that its first-period exploitation imposes on the entrant's future profits. This inefficiency, however, is absent when the commons totally regenerate across periods. Under incomplete information, we identify an additional form of inefficiency. In particular, the incumbent operating in a low-stock CPR underexploits the resource in order to signal the low available stock to potential entrants, deterring entry.
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Details
- Title
- Can incomplete information lead to under-exploitation in the commons?
- Creators
- Ana Espínola-Arredondo - School of Economic Sciences, 111C Hulbert Hall, Washington State University, Pullman, WA 99164, United StatesFélix Muñoz-García - School of Economic Sciences, 103G Hulbert Hall, Washington State University, Pullman, WA 99164-6210, United States
- Publication Details
- Journal of environmental economics and management, Vol.62(3), pp.402-413
- Academic Unit
- Economic Sciences, School of
- Publisher
- Elsevier Inc
- Identifiers
- 99900547330101842
- Language
- English
- Resource Type
- Journal article