A Dynamic Game of Status-Seeking with Public Capital and an Exhaustible Resource
نویسندگان
چکیده
This paper explores the link between status-seeking and the exploitation of a common-property exhaustible resource. The extracted resource is an input in the production of a final good. The other input is man-made capital, which is a second state variable. Extraction requires efforts. Economic agents derive utility not only from absolute consumption, but also from relative consumption, because the latter is a signal of relative status. We consider a differential game involving n infinitely-lived agents. We compare the Markov-perfect Nash equilibrium of this game with the outcome under cooperation. We find that the degree of status-consciousness has important impact on the Markov-perfect Nash equilibrium. A higher degree of statusconsciousness leads to greater excessive consumption, and lower capital accumulation. If extraction is costless, status-consciousness has no impact on the extraction/resource-stock ratio. However, with costly extraction, higher status-consciousness reduces this ratio.
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