INCOMPLETE OWNERSHIP, RENT DISSIPATION, AND THE RETURN TO RELATED INVESTMENTS

The welfare loss from free access resource use is examined in a genera l equilibrium model. Actions that intensify competition for the resour ce, either by lowering the private cost or raising the private benefit of using it, can raise this loss above the rent the resource would ea rn if owned. Such 'excess dissipation' is illustrated with examples ap plicable to unowned groundwater. Regulatory policies that fix inputs n eeded to acquire the resource work by transferring part of the resourc e's rent to controlled inputs. The resulting welfare effect depends on the elasticity of substitution between, and relative prices of, contr olled and uncontrolled inputs.