The concepts we use to model the distribution of PGRFA conservation funds between world regions and countries are all characterized by what Rose and Stevens call "consensus equity". Unfortunately, no consensus exists on the best definition of equity (Rose and Stevens, 1998). While efficiency-equity tradeoffs receive substantial attention in the mainstream economics literature, equity concerns receive little attention in the resource economics literature. Equity tends not to be a strong mechanism for making allocations, and the traditional economist prefers notions of efficiency and allocations that maximize consumer plus producer surplus.8 Realistically, however, political realities can require equity concerns to be of important, or even prime, concern. Methodological rules for interactions between efficiency and equity theory have yet to be worked out. Within the class of equity allocations at least, the Shapley value format we use as the basis for our cooperative games solutions is efficient.9

In this chapter, we considered three rules, denoted as ^, , and for allocating the biodiversity conservation funds among regions. The difference between the three allocation rules proposed here depends on the possibilities for bargaining. The outcome of the first allocation rule H^ (the null threat and egalitarian principle in section 2.1) is characterized at the domestic (country) level by the egalitarian criterion, while the outcome of payoff function ^ (the strong threat and the quotient game lobbying principle in section 2.2) depends exclusively on the bargaining power of each country.

The third allocation rule (the subsidiarity principle in section 2.3) is particularly appropriate as part of a flexible mechanism for biodiversity conservation as it allows the use of different types of control mechanisms at different levels of negotiation process. In other words, conservation fund targeting at the world region level can be based on an efficient and equitable allocation rule and, as each world region is then free to distribute the conservation funds within the region, each world region and each national program can be based on a different set of rules tailored to regional and national characteristics that address the requirement of efficiency and equity.

The possibility for parties to form blocks in competing over the distribution of the conservation funds motivates the cooperative game theory backdrop to this chapter. Perhaps surprisingly, in this framework, the notion of equity and power are very similar. The key concept behind the allocation rules presented here is that the outcome a player can obtain depends on her bargaining power.

8 Some economists may argue that equity and fairness concerns are really a veneer for hiding self-interests. To someone who has that view, we note that the model presented here may be of interest as a tool for analytically expressing self-interests.

9 For a discussion of the efficiency of the Shapley value in making allocations, see Eatwell, Milgate, and Newman (1989), p. 24 and p. 213.

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