Date of Award:

5-2014

Document Type:

Dissertation

Degree Name:

Doctor of Philosophy (PhD)

Department:

Economics and Finance

Advisor/Chair:

Arthur Caplan

Co-Advisor/Chair:

Charles Sims

Abstract

This dissertation addresses issues pertinent to the control of an invasive species, issues that pertain both to a species’ introduction at a country’s international border and its spread within the country’s border. In the first essay, tariffs and inspections are examined as a joint border control mechanism. In a deterministic setting, where the invasive species level is functionally related to a foreign (i.e., exporting) country’s shipment size, a traditional tariff can be optimal for the home (i.e., importing) country in the short run, but distorts the entry condition for foreign firms and results in a suboptimal industry size in the foreign country in the long run. When the foreign country’s abatement effort determines the invasive species level, an additional home-country tariff on the invasive-species level (which I call an “invasive-species tariff”) is necessary to motivate the foreign firms to abate the invasive species at socially optimal level. In the second essay I consider the case where the invasive species contamination level is jointly determined by the foreign countries’ abating efforts and random environmental factors. The home country may use standard contracts to mitigate imperfect observability caused by the random factors. However, I show that the home country must provide risk-averse foreign countries with higher subsidy rates than the first-best rates with perfect information as compensation for partially bearing the risk. When risk-averse foreign countries face both individualistic and common random environmental factors, a standard tournament scheme is capable of attaining the home country’s first-best invasive-species solution. The third essay addresses the control of an established invasive species outbreak in the home country with multiple spatially-connected individuals. The optimal response to invasion (eradicating, stopping, or ignoring invasion) is determined by the incremental damage of invasion and the marginal control cost. Different spatial scales lead to a divergence between the control incentives of society and individuals, and result in a deficiency of individualistic control, which in turn results in a larger steady-state invasion area. Numerical analysis also demonstrates that the number, size, and spatial configuration of small and large individual land parcels influence the severity of the externality and the insufficiency of privately supplied control. I introduce a dynamic multiple-source-subsidy scheme to internalize the externalities, which prompts individuals to coordinate and follow the social optimal control path without a budget burden on the government.

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