Optimal decentralized management of a natural resource

Abstract

We construct an economic mechanism to realize in Nash equilibrium an optimal consumption time path of a natural resource. For exposition convenience, the analysis is conducted within the model initiated by Levhari and Mirman (1980). This framework allows us to explicitly calculate the consumption time paths of the resource, associated with an open-access regime, with a cooperative management and with a (stationary Markovian) Nash equilibrium of the di¤erence game induced by the proposed mechanism.Natural resource; Fish war; Difference game; Mechanism design