Question

In: Economics

4. Common resources and the tragedy of the commons Rajiv, Yakov, and Charles are lumberjacks who...

4. Common resources and the tragedy of the commons

Rajiv, Yakov, and Charles are lumberjacks who live next to a forest that is open to logging; in other words, anyone is free to use the forest for logging. Assume that these men are the only three lumberjacks who log in this forest and that the forest is large enough for all three lumberjacks to log intensively at the same time.

Each year, the lumberjacks choose independently how many acres of trees to cut down; specifically, they choose whether to log intensively (that is, to clear-cut a section of the forest, which hurts the sustainability of the forest if enough people do it) or to log nonintensively (which does not hurt the sustainability of the forest). None of them has the ability to control how much the others log, and each lumberjack cares only about his own profitability and not about the state of the forest.

Assume that as long as no more than one lumberjack logs intensively, there are enough trees to regrow the forest. However, if two or more log intensively, the forest will become useless in the future. Of course, logging intensively earns a lumberjack more money and greater profit because he can sell more trees.

The forest is an example of because the trees in the forest are and .

Depending on whether Yakov and Charles both choose to log either nonintensively or intensively, fill in Rajiv's profit-maximizing response in the following table, given Yakov and Charles's actions.

	Yakov and Charles's Actions
Rajiv's Profit-Maximizing Response		Which of the following solutions could ensure that the forest is sustainable in the long run, assuming that the regulation is enforceable? Check all that apply. Develop a program that entices more lumberjacks to move to the area. Outlaw intensive logging. Convert the forest to private property, and allow the owner to sell logging rights.

Yakov and Charles's Actions

Log Nonintensively

Log Intensively

Rajiv's Profit-Maximizing Response

Which of the following solutions could ensure that the forest is sustainable in the long run, assuming that the regulation is enforceable? Check all that apply.

Develop a program that entices more lumberjacks to move to the area.

Outlaw intensive logging.

Convert the forest to private property, and allow the owner to sell logging rights.

Expert Solution

It has been stated that anyone can cut trees in the forest.

However, more the number of lumberjacks, fewer would be the trees available to each one.

This means trees in forest are non-excludable and rival in consumption.

A good which is non-excludable and rival in consumption are referred to as common resource.

So,

The forest is an example of common resource because trees in the forest are non-excludable and rival in consumption.

It has been stated that intensive logging results in higher profit for a lumberjack. Moreover, if a lumberjack logs non-intensively then also he cannot induce others to do so and thus lose profit if other log intensively.

So, each lumberjack would want to log intensively.

Thus,

If Yakov and Charles log non-intesively then Rajiv's profit maximizing response would be to log intensively.

If Yakov and Charles log intesively then Rajiv's profit maximizing response would be to log intensively.

Following are the required solutions -

1. Outlaw intensive logging.

2. Convert the forest to private property, and allow the owner to sell logging rights.

Rahul Sunny answered 7 months ago

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