Chapter 10 Applications to Natural Resources.ppt

Chapter 10 Applications to Natural Resources Objective: Optimal management and utilization of natural resources. Two kinds of natural resource models: i renewable resources such as fish, food, timber,etc., Section 10.2: an optimal forest thinning model. ii nonrenewable or exhaustible resources such as petroleum, minerals, etc. Section 10.3: an exhaustible resource model. 10.1 The Sole Owner Fishery Resource Model 10.1.1 The Dynamics of Fishery Model Notation and terminology is due to Clark 1976 : ? the discount rate, x t the biomass of fish population at time t , g x the natural growth function, u t the rate of fishing effort at time t ; 0 ? u ? U, q the catchability coefficient, p the unit price of landed fish, c the unit cost of effort. Assume growth function g is differentiable and concave, where X denotes the carrying capacity, i.e., the maximum sustainable fish biomass. The model equation due to Gordon 1954 and Schaefer 1957 is The instantaneous profit rate is From 10.1 and 10.2 , it follows that x will stay in the closed interval 0? x ? X provided x0 is in the same interval. An open access fishery is one in which exploitation is completely uncontrolled. Fishing effort tends to reach an equilibrium, called bionomic equilibrium, at the level at which total revenue equals total cost. In other words, the so-called economic rent is completely dissipated. From 10.3 and 10.2 , We assume . The economic basis for this result is as follows: If the fishing effort is made, then total costs exceed total revenues so that at least some fishermen will lose money, and eventually some will drop out, thus reducing the level of fishing effort. On the other hand, if fishing effort is made, then total revenues exceed total costs, thereby attracting additional fishermen, and increasing the fishing effort. 10.1.2 The Sole Owner Model The bionomic equilibrium solution obtained from the open access fishery model usually implies severe b