TY  - JOUR
AU  - Kotchen,Matthew J.
AU  - Salant,Stephen W.
TI  - A Free Lunch in the Commons
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15086
PY  - 2009
Y2  - June 2009
UR  - http://www.nber.org/papers/w15086
L1  - http://www.nber.org/papers/w15086.pdf
N1  - Author contact info:
Matthew Kotchen
School of Forestry & Environmental Studies,
School of Management,
and Department of Economics
Yale University
195 Prospect Street
New Haven, CT 06511
Tel: 203/432-9533
Fax: 203/436-9150
E-Mail: matthew.kotchen@yale.edu

Stephen Salant
University of Michigan
Department of Economics
611 Tappan
254 Lorch Hall
Ann Arbor, MI 48109-1220
Tel: 734 223 7439
E-Mail: ssalant@umich.edu
AB  - 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.
ER  -