Natural Resource Management: A Network Perspective

Abstract

AbstractThis paper studies the role of social networks in the management of natural resources. We consider a finite number of agents who exploit a specific natural resource. Harvesting is subject to three external effects, namely resource stock externalities, crowding externalities, and collaboration spillovers. We show that the structure of the social network—defined by the presence of collaboration links between individual agents—determines the equilibrium and the optimal harvesting amount. We then allow the agents to make decisions about creating or eliminating cooperation links, which endogenizes the structure of the network and is proved to affect total harvesting and aggregate welfare. Conservation plans are shown to change the regulator’s objective and increase even further the gap between the decentralized and the optimal outcomes. We show that the optimal policy depends explicitly on the structure of the network and the ‘centrality’ of the associated agents. Finally, introducing heterogeneity is proved to affect both individual profits and the incentives to create cooperation links.