Conservation for Sale: a Dynamic Common Agency Model of Natural Resource Regulation

This paper considers the regulation of a natural resource within a dynamic common agency framework. In setting harvest quotas, the regulator responds to lobbying pressure (contributions) from harvesters and conservationists. The truthful Markov perfect equilibrium stock is then an increasing function of the effective political weight for conservationists. Since the contributions to the regulator are independent of the no-regulation equilibrium, both individual and aggregate welfare may decline by adopting regulation. Indeed, harvesters operating under private property will always oppose regulation, and harvesters operating under common property will oppose regulation if their welfare is not valued highly enough by the regulator. Since conservationists' gross welfare is always improved by regulation, and since the regulator cannot fully capture their rents, conservationists will support regulation. For regulation to be supported by harvesters and conservationists, it is more important that the welfare of harvesters be taken into account by the regulator. This is because harvesters, like conservationists, value the stock, but conservationists, unlike harvesters, place no value on the harvests.