Aprile, Maria Carmela Chiarini, Bruno Marzano, Elisabetta
Year of Publication:
CESifo Working Paper No. 7344
This paper presents a simple strategic model (defined as a shortsighted game) to highlight the incentives for local governments to allow the exploitation of land in areas not suitable for such exploitation due to environmental or other risks. Municipal discretionary policy inevitably produces strategic complementarities and guides individuals to use the land (to choose the most beneficial “shortsighted” Nash equilibrium). In light of these results, it seems possible to state that the definition of non-exploitable territory and the decisions concerning it should not be left to local governments.
land exploitation municipal policy strategic complementarities myopic equilibrium