ECON 208 Lecture Notes - Lecture 20: Atlantic Cod, Club Good, Marginal Cost

• School: McGill University
• Department: Economics
• Course: ECON 208
• Professor: Eesha Sen Choudhury

Document Summary

Common property resources: non-excludable but rivalrous: overuse causes excessive depletion, ex fisheries, buffalo, elephants, private users go to mbpriv (=pd) = mcpriv, marginal benefit (private) is the same as the pd = marginal cost (private) If mcpriv < mcsocial, pd < mcsocial (overuse: one consumer has no effect, but same for us all (we all think we will have no effect), so nobody has the incentive to restrict their own use. It made the elephants valuable to the people will those property rights bc animals bring in tourism --> these people have incentive to protecting the animals so they drove out ivory-hunters. Why/how do property rights work: current market price reflects future values, property right gives incentive and ability to preserve future value. Incentive to increase market value: ability to do this because of laws, overuse reduces future values, so, reduces current market price of property rights, but owners do not want this capital loss so they protect.