Dynamic Mechanism Design for a Global Commons
Rodrigo Harrison; Roger Lagunoff
International Economic Review, forthcoming
We model dynamic mechanisms for a global commons. Countries value both consumption and conservation of an open access resource. A country’s relative value of consumption-to-conservation is privately observed and evolves stochastically. An optimal quota maximizes world welfare subject to being implementable by Perfect Bayesian equilibria. With complete information, the optimal quota is first best; it allocates more of the resource each period to countries with high consumption value.
Under incomplete information, the optimal quota is fully compressed — identical countries always receive the same quota even as environmental costs and resource needs differ. This is true even when private information is negligible.
JEL Codes: C73, D82, F53, Q54, Q58
Key Words and Phrases: Optimal quota, full compression, fish wars, Perfect Bayesian equilibria, international agency, climate change
Etiquetas: climate change, fish wars, full compression, international agency, Optimal quota, Perfect Bayesian equilibria