by Matthew J. Kotchen and Stephen W. Salant
- We derive conditions under which cost-increasing measures - consistent with either regulatory constraints or fully expropriated taxes - can increase the profits of all agents active within a common-pool resource. This somewhat counterintuitive result is possible regardless of whether price is exogenously fixed or endogenously determined. Consumers are made no worse-off and, in the case of an endogenous price, can be made strictly better-off. The results simply require that total revenue be decreasing and convex in aggregate effort.
Kotchen, M.J. and S.W. Salant (2009). "A Free Lunch in the Commons." NBER Working Paper No. 15086, June 2009.
