All-Pay Auctions with Weakly Risk-Averse Buyers

We use perturbation analysis to study independent private-value all-pay auctions with weakly risk-averse buyers. We show that under weak risk aversion: 1) Buyers with low values bid lower and buyers with high values bid higher than they would bid in the risk neutral case. 2) Buyers with low values bid lower and buyers with high values bid higher than they would bid in a first-price auction. 3) Buyers' expected utilities in an all-pay auction are lower than in a first-price auction. 4) The seller's expected payoff in an all-pay auction may be either higher or lower than in the risk neutral case. 5) The seller's expected payoff in an all-pay auction may be either higher or lower than in a first-price auction

Technology Diffusion, Abatement Cost and Transboundary Pollution

This paper studies countries' incentives to develop advanced pollution abatement technology when technology may spillover across countries and pollution abatement is a global public good. We are motivated in part by the problem of global warming: a solution to this involves providing a global public good, and will surely require the development and implementation of new technologies. We show that at the Nash equilibrium of a simultaneous-move game with R&D investment and emission abatement, whether the free rider effect prevails and under-investment and excess emissions occur depends on the degree of technology spillovers and the effect of R&D on the marginal abatement costs. There are cases in which, contrary to conventional wisdom, Nash equilibrium investments in emissions reductions exceed the first-best case

Empirical Analysis of National Income and So2 Emissions in Selected European Countries

Data on GDP per capita and sulfur emissions for twelve European countries were analyzed to determine the relationship between emissions and income in these countries. As a whole, the relationship between sulfur emissions and per capita income is a fourth order polynomial and not a quadratic one as found in most studies. When countries were examined individually, seven out of the twelve countries depicted the same relationship. Looking closely at the regulations restricting sulfur emissions in the UK, the impact of all regulations supported the inverted U-shaped Kuznets curve. Individually, however, it is found that only two regulations have statistically significant impacts: Smoke Abatement Act in 1926 (reduced the amount of sulfur associated with a given level of GDP); and Clean Air Act in 1956 (increased the amount of sulfur emissions associated with a given level of GDP)

Land, Environmental Externalities and Tourism Development

In a two sectors dynamic model we analyze the process of tourism development based on the accumulation of capital (building of tourism facilities) and the reallocation of land from traditional activities to the tourism sector. The model incorporates the conflict between occupation of the territory by the tourism facilities, other productive activities and availability of cultural, natural and environmental assets that are valued by residents and visitors. We characterize the process of tourism development in two settings: the socially optimal solution and a situation where the costs of tourism expansion are external to the decision makers, where externalities on residents as well as intraindustry externalities are considered. Regarding the optimal solution, we show that it is optimal to limit tourism expansion before it reaches its maximum capacity even in a context where the economic attractiveness of tourism relative to other productive sectors rise continuously. However, in this context and when all the costs of tourism development are externalities the only limit to tourism quantitative expansion is its maximum capacity determined by the availability of land. Finally, we show that excessive environmental degradation from the future generations' point of view is not a problem of discounting the future but rather a problem of externalities that affects negatively the current and future generations

Optimal Afforestation Contracts with Asymmetric Information on Private Environmental Benefits

We investigate the problem of subsidising afforestation when private information exists with respect to the level of private utility derived from the project. We develop a simple model that allows for an intelligent design of contracts when information is asymmetric. The model involves the Principal and two groups of agents (landowners): a green' group deriving high private utility from the projects and a conventional' group deriving lower utility. Afforestation projects may be produced in different environmental quality, and we distinguish between two cases, a high quality and a low quality project. We find that the optimal set of contracts under asymmetric information involves two different contracts. One in which green landowners are somewhat overcompensated for projects of high quality, and one where conventional landowners are offered contracts including lower quality projects, compared to the symmetric case, but with compensation equal to his indifference payment. It is the ability to reduce quality requirements along with subsidies offered that allows for revelation of the private information. Finally, we discus how the results obtained may be used in the implementation of incentive schemes

Assessing the Effectiveness of Tradable Landuse Rights for Biodiversity Conservation: An Application to Canada's Boreal Mixedwood Forest

Ecological reserve networks are an important strategy for conserving biodiversity. One approach to selecting reserves is to use optimization algorithms that maximize an ecological objective function subject to a total reserve area constraint. Under this approach, economic factors such as potential land values and tenure arrangements are often ignored. Tradable landuse rights are proposed as an alternative economic mechanism for selecting reserves. Under this approach economic considerations determine the spatial distribution of development and reserves are allocated to sites with the lowest development value, minimizing the cost of the reserve network. The configuration of the reserve network as well as the biodiversity outcome is determined as a residual. However cost savings can be used to increase the total amount of area in reserve and improve biodiversity outcomes. The appropriateness of this approach for regional planning is discussed in light of key uncertainties associated with biodiversity protection. A comparison of biodiversity outcomes and costs under ecological versus economic approaches is undertaken for the Boreal Forest Natural Region of Alberta, Canada. We find a significant increase in total area protected and an increase in species representation under the TLR approach