Multi-jurisdiction quota enforcement for transboundary renewable resources

Many renewable resources, such as fish stocks, water or environmental quality, are shared between different countries. The management of such resources then relies on international agreements. We develop a model of a shared renewable resource for which there is an international agreement that determines each country’s share of total extractions. Each government is responsible for the enforcement of their national quota. The countries can cheat on the agreement by reducing enforcement efforts and thereby inducing their firms to violate their quotas. We analyze the effects of this in a differential game framework. There are two games. First, a Stackelberg game between the government and the firms within each country. Second, an enforcement game at the international level between different governments. Our results suggest that no free-riding only occurs if countries have asymmetric beliefs regarding the environmental preferences of rival countries. The extent of free-riding in enforcement can be influenced by both domestic and international policy instruments. The effectiveness of domestic instruments (legislation) versus international instruments (treaties) depends to a large extent on resource dynamics and the countries’ preferences for sustainability.