When is the Standard Analysis of Common Property Extraction Under Free Access Correct?--A Game-Theoretic Justification for Non Game-Theoretic Analyses

Abstract

Analyses of common property extraction under "free access" used to assume period-by-period rent dissipation thus avoiding the use of game theory; more modern analyses instead deduce the subgame perfect Nash equilibrium of the common property game and then investigate its free-access limit. Salant and Negri (1987) providing a troubling example where these two methodologies yield radically different predictions: while the older analysis predicts eventual extinction of the resource, the game-theoretic analysis predicgts unlimited growth. We review and simplify their example and then provide weak conditions insuring that the two methodologies yield the same predictions.