Managerial Myopia in Mismanaging Renewable Resources

Background . Previous research demonstrates three main causes for frequent cases of overexploitation of renewable resources : open access, provision problem and misperception of dynamics. Aim . The aim of this study is to explore the role of a fourth factor for overexploitation of renewable resources , managerial myopia (also referred to as short-termism ), as well as to further explore the role of mental models , personal heuristics and group dynamics in mismanagement of renewable resources . Method . For this purpose, the study adopts an experimental design using a System Dynamics (SD)-based Interactive Learning Environment (ILE). The SD-ILE offers sufficient information to the players who are instructed to operate in an oligopoly situation where open access is excluded. Findings . Managerial myopia seems to be a relevant factor in pushing players to develop short-term , over-aggressive policies. The simulations show that optimal or sufficient policies are rejected by players, even when correctly identified, due to perverse incentives generated by short-term accounting goals. A feasible solution for myopic behavior is identified and tested: measuring a larger, balanced set of performance indicators on which managers develop their strategies. Conclusions . The experiment shows that significant improvements in performance and mitigation of myopic behavior are possible. It also demonstrates the relevant role that SD-ILEs may play in studying renewable resource issues and assisting decision-makers in developing and implementing coherent policies .