Games and Resources

Game theory is the natural tool when analyzing the strategic use of natural resources. This article presents a sequence of related simple two-stage games to illustrate a range of problems, generating a large number of lessons. It explores environments that are static as well as dynamic, resources that are publicly owned as well as privately owned, and strategic investments in substitute (or green) technology as well as complementary technology (such as extraction technology). The lessons vary greatly across the institutional settings, but the lessons have in common that they are all derived from the use of simple game theory. This way, this article provides a survey of how game theory can be fruitfully employed when studying environmental and resource economics. The resource itself can be, for instance, fish, forests, fossil fuel, fresh air, or freshwater lakes, to mention examples starting with the letter f.