Title: Resource exploitation under environmental uncertainty

Authors: Yacov Tsur, Amos Zemel

Addresses: Department of Agricultural Economics and Management, The Hebrew University, P.O.B. 12, Rehovot 76100, Israel, and Department of Applied Economics, University of Minnesota, 1994 Buford Avenue, St. Paul, MN 55108, USA. ' Center for Energy and Environmental Physics, The Jacob Blaustein Institute for Desert Research, Ben-Gurion University of the Negev, Sde Boker Campus, 84990, Israel, and Department of Industrial Engineering and Management, Ben Gurion University of the Negev, Beer Sheva, 84105, Israel

Abstract: Optimal resource management is considered, with a special emphasis on the possible occurrence of a catastrophic environmental event, whose occurrence conditions arc subject to uncertainty. The events are classified according to the extent to which the damage they inflict is reversible, and are characterised as exogenous or endogenous. The implications of this classification on the ensuing optimal policies are analysed. The framework presented unifies the analysis of the plethora of events considered, relating their optimal state processes to the particular class to which the corresponding event belongs. We find that endogenous events give rise to equilibrium intervals and always entail more conservation. In contrast, exogenous events entail isolated equilibrium levels, and conservation is ensured only if the event is reversible.

Keywords: conservation; endogenous events; exogenous events; event uncertainty; irreversibility; optimal resource management.

DOI: 10.1504/IJEP.1998.005152

International Journal of Environment and Pollution, 1998 Vol.10 No.2, pp.326 - 338

Published online: 04 Sep 2004 *

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