Spatial Resource Wars: A Two Region Example

We develop a spatial resource model in continuous time in which two agents strategically exploit a mobile resource in a two-location setup. In order to contrast the overexploitation of the resource (the tragedy of commons) that occurs when the player are free to choose where to fish/hunt/extract/harvest, the regulator can establish a series of spatially structured policies. We compare the three situations in which the regulator: (a) leaves the player free to choose where to harvest; (b) establishes a natural reserve where nobody is allowed to harvest; (c) assigns to each player a specific exclusive location to hunt. We show that when preference parameters dictate a low harvesting intensity, the policies cannot mitigate the overexploitation and in addition they worsen the utilities of the players. Conversely, in a context of harsher harvesting intensity, the intervention can help to safeguard the resource, preventing the extinction and also improving the welfare of both players.

Keywords: Spatial Harvesting Problems, Markov Perfect Equilibrium, Environmental Protection Policies, Differential Games

JEL Classification: Q28, C72, Q23, C61, R12

Suggested Citation: Suggested Citation

Fabbri, Giorgio and Faggian, Silvia and Freni, Giuseppe, Spatial Resource Wars: A Two Region Example (March 13, 2018). Available at SSRN: https://ssrn.com/abstract=3155045 or http://dx.doi.org/10.2139/ssrn.3155045