Dynamic Efficiency Illustration

Dynamic efficiency is illustrated for the two period case.  The example is taken from "Environmental and Natural Resource Economics" by Tom Tietenberg, fourth edition pages 25-30.  Choose one of the options below to explore a mathematical and graphical analysis of dynamic efficiency.

Assumptions and Variables
A Case of Static Efficiency
Dynamic Efficiency - Case I - Equivalent to Static Efficiency
Dynamic Efficiency - Case II
Interactive Two Period Dynamic Efficiency

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A Case of Static Efficiency Back to top      Back to Main Page


Dynamic Efficiency - Case I - Equivalent to Static Efficiency Back to top      Back to Main Page


Dynamic Efficiency - Case II Key Idea: Considering dynamics may lead to a different equilibrium solution than if only static efficiency is considered.  For the above example, static efficiency equilibrium is 15 and 5, dynamic efficiency is 16.2 and 9.8.
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Interactive Two Period Dynamic Efficiency Legend:
Period 1    Demand        Supply(MOC)        Marginal Net Benefit
Period 2    Demand        Supply(MOC)         Marginal Net Benefit
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