Three essays on natural resource allocation and public policy

Abstract

This dissertation provides three papers on natural resource allocation and public policy. The first and second papers examine the allocation of rafting permits in the Four Rivers Lottery. The third paper examines the policy of implementing renewable portfolio standards. The first paper creates a measure for rafter surplus from lotteries with and without a restriction on permit transfers. We examine the impact of policy changes on the surplus trade-off between restricted and unrestricted permits in order to determine the conditions that lead to restricted permits generating more surplus than unrestricted permits. We provide a possible rationale for why a restriction on permit transfers is common among lotteries that distribute natural resources and policy recommendations based on the analysis. The second paper models the choices of the lottery applicants. In a ranked-choice lottery, applicants reveal their preferences for different characteristics of a good by ranking the options. Individuals make a trade-off between the different characteristics; and the marginal rate of substitution (MRS) indicates the relative preference of one characteristic over another. We derive the MRS. Applying the model to the United State Forest Service's Four Rivers Lottery, we show that on average applicants are willing to accept less river discharge to obtain a permit. In the third paper, we present an alternative approach to modeling the renewable portfolio standard as a proportional constraint on the utility company's input decision. The constraint model is more consistent with the incentives created by the RP standard, and illustrates that a binding RP standard cannot cause electricity prices to decrease. Empirical analysis of sixteen states with an RP standard supports the theory that the RP standard increases the price of electricity.