Changing risks and mobile common pool resources: Economic analysis of resource-user behavior and policy instruments for sustainability

• Applicant: Professor Dr. Martin F. Quaas
• Subject Area: Economic Policy, Applied Economics ; Economic Theory
• Term: from 2019 to 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 430165366

Renewable natural resources are of vital importance for the future of human well-being. They are under constant threat of overuse, especially if (i) of common pool nature, and (ii) mobile, as resource users have strategic incentives to extract more than the socially efficient amount. Two prominent and still unresolved cases in Europe are overfishing and overuse of groundwater resources. New, scientifically sound policy approaches are urgently needed, as these resources face changing and increasing risks: On the one hand, climate change will alter volatility in the regeneration of the resource as well as potential tipping points in its dynamics of movement. On the other hand, patterns of resource use shape risks and thus lead to ‘endogeneous risks’.Our previous work shows that such risks are highly relevant for the management of natural resources, and that the individually optimal resource use depends on individual risk attitudes. However, research on these issues so far focused on rational, risk-neutral actors – an assumption in sharp contrast to evidence from behavioral economics. CRaMoRes sets up a new theory and model, considering different types of individual behavior under risk, including risk aversion and state-dependent risk preferences. We build on dynamic game theory to study how changes in climate forcing and endogeneous risks affect the strategic incentives for resource (over-) use of mobile common pool resources. CRaMoRes analyzes and proposes new, adaptive policy approaches, including rights-based, market-based, and information-based management. To assess the distributional consequences of changing risks, we use recently developed criteria of social evaluation in risky situations. CRaMoRes will experimentally test the implications of different policy approaches in the lab. We quantify and test the newly conceived policy approaches for two case studies: the Baltic fishery and the Upper Rhine aquifer. Both cases constitute relevant examples of trans-European, mobile, renewable natural resources. CRaMoRes will be able to achieve the envisaged significant progress beyond the state of the art in resource economics by combining the complementary and compatible expertise of the French and German team. Realizing synergies is facilitated by the joint supervision of a doctoral researcher (hired by Leipzig University) and a two-year postdoc (hired by CEE-M) as well as two joint research retreats per year and an international conference hosted by CEE-M. Research output will be disseminated in form of educating young researchers, presentations at international conferences, peer-reviewed scientific publications, and two policy briefs, thus making available for policy makers the scientific basis for better regulating mobile common pool resources under changing risks.

• DFG Programme: Research Grants
• International Connection: France
• Cooperation Partner: Professor Dr. Nicolas Quérou