Strategic Behavior and the Environment > Vol 3 > Issue 4

Don't Forget to Protect Abundant Resources

Ana Espínola-Arredondo, School of Economic Sciences, Washington State University, USA, anaespinola@wsu.edu Félix Muñoz-García, School of Economic Sciences, Washington State University, USA, fmunoz@wsu.edu
 
Suggested Citation
Ana Espínola-Arredondo and Félix Muñoz-García (2013), "Don't Forget to Protect Abundant Resources", Strategic Behavior and the Environment: Vol. 3: No. 4, pp 251-278. http://dx.doi.org/10.1561/102.00000032

Published: 21 Aug 2013
© 0 A. Espínola-Arredondo and F. Muñoz-García
 
Subjects
Environmental Economics,  Environmental Economics:Endangered Species,  Industrial Organization:Market Structure,  Industrial Organization:Regulatory Economics,  Economic Theory:Game Theory,  Fisheries,  Environmental politics,  Government
 
Keywords
L12Q20D62
Entry DeterrenceMultiple incumbentsCommon pool resources
 

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In this article:
1. Introduction
2. Model
3. Second Period
4. First Period
5. Overexploitation of the Commons
6. Welfare Comparisons
7. Conclusions
Appendix
References

Abstract

We examine an entry-deterrence model with multiple incumbents who strategically increase their individual appropriation in order to prevent entry. We show that entry deterrence yields a welfare improvement, relative to contexts of unthreatened entry, if firms exploit a relatively scarce resource. When incumbents compete for an abundant commons, however, their exploitation becomes large, and welfare losses can arise. Hence, our paper suggests that policies that protect the commons from further entry are actually more necessary when the resource is abundant than when it is scarce.

DOI:10.1561/102.00000032