Conference Agenda

This paper studies sustainability agreements between competitors about their use of a natural resource. A symmetric Cournot model is employed. I consider two types of restrictions, specifying (1) the absolute usage of the natural resource per firm, and (2) the relative usage, per unit of production. Compared with an absolute usage restriction, a relative usage restriction generally achieves a lower usage of the natural resource for a given competitive harm. However, it is also associated with higher production costs. Consequently, firms have an incentive to specify their usage target in absolute terms. A policymaker could consider mandating a relative specification. Unfortunately, unless returns to scale are decreasing, firms lack incentives to agree on a relative usage which is any lower than the relative usage which minimizes costs.

Illegal wildlife trade continues to pose significant and growing threats to species globally. Where outright bans have failed, conservation farming has been considered, which aims to reduce illegal poaching by “flooding the market” with farmed product. However, predicting if farming will succeed necessitates a holistic understanding of how supply and demand interact and how markets will respond. An illegal trade for totoaba (Totoaba macdonaldi) swim bladder, dominated by a Mexican monopolist cartel, has continued unabated despite half a century of prohibitions on international trade and domestic fishing. We investigate if farming can reduce poaching and support a healthy wild population by extending a flexible bioeconomic model of a three-stage illegal supply chain: poachers sell to traders (i.e., middlemen or criminal organizations) who sell to end-markets. Here we show that under current market conditions conservation farming maintains a healthy population, and relative to the monopolist, the trader’s strategic response to farming will either decrease poaching by 29% or increase poaching minimally by 4%. We show that profits of the Mexican cartel would drop by 200 to 320 million USD, while profits from farming would increase to 174 or 55 million USD.

Our results upend previous assertions that certain strategic responses will undermine conservation efforts and always result in population collapse. Furthermore, our flexible quantitative framework allows for an objective evaluation of conservation farming for different species and market structures.

We develop a stochastic dynamic model of renewable resource management with an income sharing mechanism under two market failures: imperfect insurance markets and spatial externalities due to resource mobility. As both market failures impact harvesting incentives for risk averse managers, we are interested in their interaction and study whether income sharing can correct these failures. We also understand the characteristics of a resource that would benefit most from income sharing. In our model, managers will share income to spread risk and insure against biological volatility. As a co-benefit, cooperation internalizes negative spatial externalities. We find that income sharing can be a promising policy tool to manage resource use, but whether efficient management can be achieved depends on the type of sharing rule used to distribute pay-offs from the fund.

The economics of overfishing has been largely understood since long, and proposals for economically more efficient management have been made. In particular, individual transferable quotas, also called catch shares, have been identified as a way towards greatly increasing efficiency and biological sustainability of fisheries. Yet, the uptake of catch shares as the primary form of rights-based fishery management has been limited and slowing down in recent years and, strikingly, the problem of overfishing has been increasing rather than going down in the past decades. In this paper we develop a theory to analyze fisheries management from a fisherman’s perspective. We study the preferred quota management from the fisherman’s perspective and find that the catches are strictly higher than the more efficient, rent-maximizing management. We further compare the welfare that a fisherman derives from (i) an efficiently managed fishery and (ii) a fishery under (regulated) open access. As overall efficiency is higher in a well-managed fishery, in principle it could Pareto-dominate the open-access fishery. In practice, however, the fisherman may be better off in the fishery under (regulated) open access, and even full grandfathering of resource-use rights does not guarantee a strict Pareto improvement.