On the Optimal Taxation of Common-Pool Resources
Georgios Kossioris, Michael Plexousakis, Anastasios Xepapadeas, Aart de Zeeuw
Q25, C73, C61
Differential Games, non-linear Feedback Nash Equilibria, Ecosystems, Optimal State-dependent Tax
Climate Change and Sustainable Development
Recent research developments in common-pool resource models emphasize the importance of links with ecological systems and the presence of non-linearities, thresholds and multiple steady states. In a recent paper Kossioris et al. (2008) develop a methodology for deriving feedback Nash equilibria for non-linear differential games and apply this methodology to a common-pool resource model of a lake where pollution corresponds to benefits and at the same time affects the ecosystem services. This paper studies the structure of optimal state- dependent taxes that steer the combined economic-ecological system towards the trajectory of optimal management, and provides an algorithm for calculating such taxes.