[Publisher:] Institut für Weltwirtschaft (IfW) [Place:] Kiel [Year:] 1993
Kiel Working Paper 580
This paper sheds some light on the possible implications of compensations which are paid for the maintenance of an environmental stock. It shows that serious complications can arise if the resource-owner can vary the compensation price. In that case, extraction-driven stock preservation policies can conflict with compensation-driven ones and imply instability. Whether compensation policies can neglect this aspect depends crucially on the credibility of sticky compensation prices.