NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Free Lunch in the Commons

Matthew J. Kotchen, Stephen W. Salant

NBER Working Paper No. 15086
Issued in June 2009
NBER Program(s):   EEE   PE

We derive conditions under which cost-increasing measures - consistent with either regulatory constraints or fully expropriated taxes - can increase the profits of all agents active within a common-pool resource. This somewhat counterintuitive result is possible regardless of whether price is exogenously fixed or endogenously determined. Consumers are made no worse-off and, in the case of an endogenous price, can be made strictly better-off. The results simply require that total revenue be decreasing and convex in aggregate effort, which is an entirely reasonable condition, as we demonstrate in the context of a renewable natural resource. We also show that our results are robust to heterogeneity of agents and, under certain conditions, to costless entry and exit. Finally, we generalize the analysis to show its relation to earlier work on the effects of raising costs in a model of Cournot oligopoly.

download in pdf format
   (233 K)

email paper

This paper is available as PDF (233 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15086

Published: Kotchen, Matthew J. & Salant, Stephen W., 2011. "A free lunch in the commons," Journal of Environmental Economics and Management, Elsevier, vol. 61(3), pages 245-253, May. citation courtesy of

Users who downloaded this paper also downloaded these:
Stavins w16403 The Problem of the Commons: Still Unsettled After 100 Years
Copeland and Taylor w10836 Trade, Tragedy, and the Commons
Fang and Norman w13797 Optimal Provision of Multiple Excludable Public Goods
Farmer and Hollenhorst w12584 Shooting the Auctioneer
Benigno w14824 New-Keynesian Economics: An AS-AD View
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us