Charles Plourde

A model of industrial pollution in a stochastic environment

Abstract Standard models of pollution abatement assume that pollution accumulation occurs in a deterministic pattern as a by-product of the production process. Governmental intervention often occurs in the form of taxation or mandatory abatement controls to reduce inefficiency caused by incomplete markets. In this paper we assume that the accumulation effect of pollution may be stochastic due, for instance, to the random absorption capacity of the ecosystem. Furthermore, we assume that the level of pollution may vary with input use as well as output level. We proceed to analyze properties of a policy for efficient social management of competitive firms which generate pollution.

Fuel economy standards in a model of automobile quality

Abstract In this paper, car manufacturers’ choice of model line is interpreted as quality provision by discriminating firms. Existing models of self-selecting consumers and discriminating production are modified and interpreted to apply to the trade-off between quality of automobiles and their fuel efficiency. It is shown that the effects of a constraint representing legislation regarding automobile fleet fuel averaging [referred to as corporate average fuel economy (CAFE)] are not invariant to the strategies available to car manufacturers in choosing the optimal model line. When firms are unable to perfectly discriminate, the optimal adjustment entails firms relying more heavily on improving the fuel economy of small cars rather than that of the more profitable large cars as compared to the case of perfect discrimination or perfect competition. This allows several implications to be drawn when our results are discussed in conjunction with recent empirical evidence regarding the effects of CAFE on pollution abatement, safety as well as CAFE’s relation to the alternative of taxation.

Crop Sharing in the Fishery and Industry Equilibrium

This article presents a model of commercial fishing in a stochastic environment that focuses on the labor-employment contract. In a partial equilibrium context, the authors show that when boat owners and crew members are risk-averse, crop sharing is the optimal contract, and the resultant labor employment level will be greater than with a (suboptimal) wage contract. Industry effects and steady-state resource growth limitations are introduced into a market equilibrium model. In this extended model, market equilibria will also involve sharing contracts. These will result in greater employment, which comes at the expense of reduced resource stocks and higher-than-necessary harvesting costs. The article also examines how industry regulation such as licensing, quotas, and subsidies will differ if the prevailing contract is cropsharing as compared with a wage. Despite the fact that cropsharing contracts are privately optimal in a regulated setting, they may not be socially optimal.

The Canada-European Union Turbot War: A Brief Game Theoretic Analysis

This paper examines the conflict over catch quotas for turbot on the Grand Banks of Newfoundland between the European Union (EU) and Canada. Economic game theory is used to analyse Canadian policy, EU policy, and the ensuing resolution. Recommendations are provided for future agreements regarding the proper management of fish stocks to ensure the long-term viability of these resources.

Transboundary Renewable Resource Management and Conservation Motives

A simple, two-country theoretical model of transboundary fishing conflicts in which one country has a nonlucrative incentive to conserve the fish stock is presented to examine the effect of such a conservation motive on the steady state stock level and to analyze how this stock level is affected by the division of the harvest. It is demonstrated that a conservation motive for one or both countries serves to increase the stock level and that this level is dependent on the harvest share of the country with the motive. A brief application to the Canada-European Union turbot and Canada-United States salmon disputes suggests consistency between the principles of the model and reality.

A note on Clemhout and Wan's dynamic games of common property resources

Recently, Clemhout and Wan (Ref. 1) provided solutions to a class of stochastic differential game models concerning common property resources. However, they only established closed-loop strategies for the infinite-horizon problem using the Kushner test. In this paper, we provide closed-loop feedback solutions to their game in a finite-time horizon with deterministic evolution dynamics.

Diagrammatic representations of the exploitation of replenishable natural resources: dynamic iterations

Abstract Geometric representations of two dynamic models of replenishable natural resource harvesting are provided. A well-known simple model is presented in which the only cost of production is the opportunity foregone. That is, present consumption implies a reduction in future consumption possibilities. Diagrams show the iterations of an optimal program. A four-quadrant diagram is used to illustrate a short-run equilibrium and the dynamics that will lead to a long-run solution on the bionomic transformation curve.

Uncertainty in Fisheries Economics: The Role of the Discount Rate

Standard models of management of a single-species fishery generally assume that the biomass is of known size and that it is generated by a well-specified deterministic growth law. In reality the biomass is of uncertain size and usually subject to random growth. Several authors have addressed the problem of random growth assuming a known initial biomass and have shown that lowering the planning discount rate proportional to the variance is an optimal planning procedure assuming small perturbations. In this paper we assume that the growth function is nonrandom but dependent upon a biomass stock of unknown size. We shall show that a planner should raise the discount rate relative to the certainty equivalent case by an amount related to societys distaste for risk in order to manage the biomass optimally over time. As is to be expected, the optimal steady-state biomass will be less than would occur in a situation of certainty.

Chapter 11 Preferences over Cyclical Paths Generated by Predator-Prey Interactions: An Application in Coastal Ecosystem Management

Publisher Summary Species with interacting relationships are extremely common in coastal areas. The study of interacting animal, insect, or wildlife species, as in predator–prey relationships, has become increasingly popular. Environmental policy or species management has not always seemed consistent, particularly in dealing with species that are part of a predator–prey interaction. It is demonstrated in this chapter that interacting species have cyclical stock variations and inconsistencies resulting from cyclical variations that are too extreme. The chapter presents various examples of marine species involved in predator–prey relationships. Environmental policies and reactions to them involve societal evaluations of “states of nature.” The chapter addresses some fundamental issues of benefit evaluation of such “states of nature” when the states recur cyclically. It also presents two common types of predator–prey models. The first type is distinguished by the characteristic that the two species or state variables converge to a steady state for any initial specification. The second type of model is one that generates cyclical oscillations over time. Both the models are known to represent predator–prey systems; however, they differ significantly in structure and in their response to policy.