Essays on Environmental Management and Network Economics

Abstract

This dissertation, “Essays on Environmental Management and Network Economics”, studies cooperation in common pooled resources. In the following three chapters, I develop a theoretical model and experiment to analyse different issues of cooperation in common pooled resource use and social network. The first chapter examines dynamic resource management where the resource is dispersed across areas. By implementing a Two Part Punishment scheme, I characterize the condition under which cooperation is supportable as Subgame Perfect equilibrium. However that condition has limitations in the pattern of resource migration. I also characterize partial cooperation and side payment to facilitate cooperation. The second chapter focuses on the effectiveness of partial communication where a majority of resource users jointly set up their own rule and apply for all users. The paper designs an experiment to compare three management regulatory scheme: external regulation, partial communication and full communication where all resource users jointly set up the rule and apply to all users. The most effective treatment to reduce the extraction is full communication, followed by partial communication and external regulation, respectively. The paper provides the explanation of the extraction difference among schemes is from group’s commitment level and compliance behavior. For the commitment level, it is set higher under partial communication than social optimal level, whereas it is not different in full communicators. For compliance behavior, the most compliance regulatory scheme is full communication, followed by partial communication and external regulation. Finally, the paper focuses on the behavior of communicators and noncommunicators in partial cooperation. I find that noncommunicators have less obedient than communicators. The third chapter studies a model of network formation using the cost distance function, where an agent experiences benefit from their direct connection and costs from the distance of connections. I propose a double best response algorithm where the agent either offers or accepts the offer from his top choice, in the network formation model. The paper provides the configuration, which consists of independent components, for all possible cases. The size of the component is sensitive to the number of agents, and the magnitude of benefits range from direct connections.