Modeling Effort and Lobbying in a Heterogeneous Common Pool Resource Setting

Extraction from a common pool resource (CPR), such as a fishery, can lead to socially inefficient and undesirable outcomes as a result of appropriation problems. Through regulation of the CPR, users may achieve a more profitable and socially efficient outcome. Feeny et al. (Land Econ 72(2):187–205, 1996) delve into some of the assumptions made by traditional CPR models and how use of those assumptions provides an incomplete framework to guide fishery policy. In the theoretical models we develop, we relax two of those assumptions: CPR users are homogeneous and are unable to create, or influence, management of the resource. We note a case where regulation of the individual user can induce others to harvest more, and relate this to the slippage effect concept. Regarding resource sustainability, we document situations where incentives exist for CPR users to lobby for tighter regulations and thus increase profits by limiting the tragedy of the commons influence.     

Inequality and outside options in common-property resource use

Using a dynamic intergenerational game, this paper analyzes the effects of inequality among resource users and their access to outside markets and credit on cooperative use of a local commons. The study finds that, depending on the agents' harvest sharing rule, the conditions under which homogeneous agents can cooperate in equilibrium may not be sufficient for cooperation when agents differ in harvesting productivity. The resource users' access to outside markets or credit may have a negative effect on efficient local resource management.     

Environmental versus Human-Induced Scarcity in the Commons: Do They Trigger the Same Response?

We study appropriation strategies in common pool resources where extinction is a credible threat. Here we present an experimental study of the appropriation of common pool resources in a dynamic setting where resource availability depends on the initial environmental characteristics of the common resource and on human-induced resource depletion due to users’ appropriation patterns. Our results show that initial resource scarcity limits appropriation by inducing an initial caution among users that persists throughout of the game. Additionally, we find that subjects restrain their appropriation strategies when scarcity increases. However, this concern for resource scarcity is not enough to prevent resource depletion. Agents do not counteract the previous rounds’ appropriation strategies but follow the appropriation trend. High appropriation levels are followed by higher appropriation strategies, thus promoting the well known tragedy of the commons. Often concern for resource preservation is not great enough to limit appropriation.      

The Tragedy of the Commons: Institutions and Fisheries Management at the Local and EU Levels

Garrett Hardin's Tragedy of the Commons argument states that resources held in common will inevitably suffer overexploitation and degradation. However, recent contradicting evidence has led theorists to question the soundness of this claim. This paper assesses the accuracy and predictive success of the six essential assumptions of Hardin's approach. The aim of the paper is to compare the functioning of the tragedy of the commons approach at the local and the international levels, in order to demonstrate that the context we choose affects the applicability of the hypothesis in explaining policy outcomes. The paper compares the validity of the tragedy of the commons hypothesis in three marine cases: California fisheries, modern Oregon fisheries and European Union Common Fisheries Policy. We find that at the local level the tragedy of the commons can be mitigated when a co-management of institutions is achieved, while the EU case shows that the tragedy of the commons is a realistic prediction when dealing with international institutions.     

General Equilibrium Tragedy of the Commons

Many poor economies depend on open access resources for their livelihoods. Households in resource-based economies allocate their time and other factors between resource extraction and other activities. As a result, factors may shift from one sector to another as marginal returns change. This has two important implications. First, it implies potentially strong linkages between resource and non-resource sectors. Second, it means that unmanaged resources cause inefficient allocations of inputs across all sectors, and the effects of resource management spill into other sectors. We construct a local general equilibrium model that accounts for inputs that over-allocate to an open access resource and create a general equilibrium tragedy of the commons. This model describes resource rent dissipation more adequately in economies with mobile factors than a model with slowly dissipating rents. Perfectly mobile factors dissipate rent in every period, but endogenous wages cause labor and capital allocations to change with the resource stock. We use the model to illustrate medium-run impacts of a limit on capital in an artisanal fishery in Honduras. Simulation results reveal that fishery management has economy-wide impacts on prices and wages. Managers in developing countries thus should consider these linkages when implementing policies to conserve fish stocks.     

The Tragedy of the Commons Revisited

The Malthus–Hardin tragedy of the commons is formulated as a dynamic game between "clans". At each date a member of a clan desires more newborns of her/his type and more current consumption, harvested from the commons. Equilibrium in the dynamic game yields a steady state level of per capita consumption and a steady population level for each clan (births equal deaths). Four outcomes are obtained, depending on the assumptions about the discount rates of members of a clan and about the mode of competition for "large populations" for each clan. Lack of property rights for agricultural land in the commons leads to equilibrium with excessive populations and low per capita consumption.     

Grazing Games: Sharing Common Property Resources with Complex Dynamics

Grasslands used for domestic livestock are often the common property of several owners and are typically characterized by complex ecosystem dynamics. We account for both these aspects by modeling the problem as a differential game where each farmer maximizes profits, given the dynamics of livestock and grass interaction. We compare the first best outcome obtained when farmers cooperate with that for non-cooperative farmers. By accounting for grassland dynamics, we challenge conventional results from the common pool literature. Although we do identify situations where the standard result holds—a tragedy of the commons unless farmers cooperate—we also find examples where a tragedy is exacerbated due to ecosystem dynamics as well as cases where a non-cooperative regime under-exploits the grassland compared to the first best outcome.     

Designing incentives for online question-and-answer forums

We provide a game-theoretic model of sequential information aggregation motivated by online question-and-answer forums. An asker posts a question and each user decides when to aggregate a unique piece of information with existing information. When the quality exceeds a certain threshold, the asker closes the question and allocates points to users. We consider the effect of different rules for allocating points on the equilibrium behavior. A best-answer rule provides a unique, efficient equilibrium in which all users respond in the first round, for substitutes valuations over information. However, the best-answer rule isolates the least efficient equilibrium for complements valuations. We demonstrate alternate scoring rules that provide an efficient equilibrium for distinct subclasses of complements valuations, and retain an efficient equilibrium for substitutes valuations. We introduce a reasonable set of axioms, and establish that no rule satisfying these axioms can achieve the efficient outcome in a unique equilibrium for all valuations.     

A strategic analysis of global warming: Theory and some numbers

We model the global warming process as a dynamic commons game in which the players are countries, their actions at each date produce emissions of greenhouse gases, and the state variable is the current stock of greenhouse gases. The theoretical analysis is complemented by a calibration exercise. The first set of results establishes theoretically, and then with illustrative numbers, the over-emissions due to a “tragedy of the commons.” The power of simple sanctions to lower emissions and increase welfare is then examined as is the effect of cost asymmetry. Finally, a complete theoretical charactrization is provided for the best equilibrium, and it is shown that it has a very simple structure; it involves a constant emission rate through time.     

Quality competition and entry: a media market case

In this paper, we study the optimal tax policy in a differential oligopoly game where the competing firms share the access to a productive renewable resource. We show that, in a Feedback Nash Equilibrium of the game, a linear Markov tax, imposed on the output, and specified as an affine function of the available resource stock, leads the competing firms to produce the socially optimal quantities over time, thus overcoming the dynamic interplay between the tragedy of the commons and the firms’ market power. The optimal tax turns out to be independent from the resource stock in a monopoly, and it cannot be defined in a duopoly.     

Tax schemes in a class of differential games

This paper evaluates tax schemes in a class of differential games. The results indicate that there are many tax schemes that support efficient resource usage, but each may fail to implement the targeted resource because of the multiplicity of equilibria. Since all of the equilibria are subgame perfect, it is difficult to predict which specific one arises. Care must then be taken in using a tax scheme as a remedy for the “tragedy of the commons.” The advantages of other policy instruments (including command-and-control regulation and a tradable permit system) are also discussed. I am indebted to Gerhard Sorger, Koji Shimomura, and two anonymous referees for their helpful comments. The detailed suggestions of one of the referees in particular have markedly improved the paper. Any remaining errors are mine. Partial financial support from MEXT KAKENHI(11730017, 18078004) is also gratefully acknowledged.     

Predicting US county economic resilience from industry input-output accounts

Resilience is defined as a system’s ability to initially resist and then recover from a shock. Here we apply this concept to examine the performance of U.S. counties during the Great Recession. The response of local economies to manmade and natural shocks is hypothesized to depend on the centrality of local industries within the economy, or how well connected they are to the other industries. We first calculate a centrality value for each industry using the national Input-Output accounts. We then ‘step down’ these values to the county level using industry employment data. We then test empirically whether local economies containing more centralized industries were more resilient, using a resilience measure that compares the local employment rebound and decline during the Great Recession. Our results suggest that measures of economic centrality adopted from the study of complex networks provide new insights when applied to the fields of regional science and spatial analysis, and economic growth more generally.     

Peer Effects and Social Networks in Education

We develop a model that shows that, at the Nash equilibrium, the outcome of each individual embedded in a network is proportional to his/her Katz–Bonacich centrality measure. This measure takes into account both direct and indirect friends of each individual, but puts less weight to his/her distant friends. We then bring the model to the data using a very detailed dataset of adolescent friendship networks. We show that, after controlling for observable individual characteristics and unobservable network specific factors, a standard deviation increase in the Katz–Bonacich centrality increases the pupil school performance by more than 7% of one standard deviation.     

Commons with increasing marginal costs: random priority versus average cost*

Indivisible units are produced with increasing marginal costs. Under average cost, each user pays average cost. Under random priority, users are randomly ordered (without bias) and successively offered to buy at the true marginal cost. Both average cost (AC) and random priority (RP) inefficiently overproduce. RP tends to overproduce less, but which game collects more surplus depends much on the demand configuration. We show that a key to compare the welfare properties of the two mechanisms is the crowding factor, i.e., the number of potential users over the number of units of output users can afford: The more crowded the commons, the more RP outperforms AC. In the quadratic cost case, beyond the threshold value of 2.4 for the crowding factor, RP strongly outperforms AC; beneath it AC only mildly outperforms RP. Thus the RP mechanism manages crowded commons better than AC.     

Breaking the elected rules in a field experiment on forestry resources

Harvesting from common resources has been studied through experimental work in the laboratory and in the field. In this paper we report on a dynamic commons experiment, representing a forest, performed with different types of communities of resource users in Thailand and Colombia, as well as student participants. We find that all groups overharvest the resource in the first part of the experiment and that there is no statistical difference between the various types of groups. In the second part of the experiment, participants appropriate the common resource after one of three possible regulations is elected and implemented. There is less overharvesting after the rules are implemented, but there is a significant amount of rule breaking. The surprising finding is that Colombian villagers break the rules of the games more often than other groups, and even more so when they have more trust in members of the community. This observation can be explained by the distrust in externally proposed regulations due to the institutional and cultural context.     

Information Structure and the Tragedy of the Commons in Resource Extraction

Synopsis This paper considers the well-known Levhari-Mirman discrete-time model of resource extraction, and investigates the effects of the information structure of the dynamic game – open-loop, Markovian or history-dependent – on the equilibrium consumption path and the overall utility of the agents. Due to the special structure of the model, the open-loop regime yields a Pareto-optimal outcome. The Markovian regime leads to the most pronounced version of the tragedy of the commons. History-dependent behavior yields an outcome set that is intermediate between the other two cases, and that may include the Pareto-optimal outcome in some cases. The level of efficiency of equilibrium behaviour is thus U-shaped as a function of the level of information the agents’ extraction strategies are based on. The analysis suggests that in environments characterized by a dynamic (and no market) externality, forcing agents to commit to open-loop behavior would constitute welfare-improving regulation.     

The challenge of the commons: Estonian housing privatization

Housing privatization directly affects each individual and raises significant questions beyond those raised in business privatization. When businesses are privatized, the responsibilities are transferred with the ownership. Housing privatization transfers the ownership of and responsibility for the benefits and costs for the internal space of a flat. However, ownership of and responsibility for the common areas and systems in the large buildings-hallways, roofs, heating, lighting, or exterior walls-are not transferred. These buildings provide a classic scenario for the tragedy of the commons. Who gets the benefits and who pays the costs? How is the externality internalized and responsibility transferred? This paper evaluates the housing privatization process in Estonia with emphasis on the problems of maintenance and the formation of dwelling owners associations. Recommendations for resolution of the tragedy of the commons are provided.     

Farsighted network formation

This paper studies a model of dynamic network formation when individuals are farsighted: players evaluate the desirability of a “current” move in terms of its consequences on the entire discounted stream of payoffs. We define a concept of equilibrium which takes into account farsighted behavior of agents and allows for limited cooperation amongst agents. We show that an equilibrium process of network formation exists. We also show that there are valuation structures in which no equilibrium strategy profile can sustain efficient networks. We then provide sufficient conditions under which the equilibrium process will yield efficient outcomes.     

A spatial network approach to urban configurations

Abstract We propose a spatial network approach to studying urban configurations by modelling explicitly knowledge transmission, aggregation and spillovers via links formed, as well as by allowing the population and the locality role (‘core’ versus ‘periphery’) in each location to be endogenously determined in equilibrium. We establish conditions for the commonly assumed monocentric configuration to arise as the unique and efficient equilibrium outcome. We also illustrate under what circumstances a spatial equilibrium may feature multicentric, urban‐rural, or multiple (disconnected) urban areas and under what conditions each configuration is socially efficient. We further characterize the spatial equilibrium by performing various comparative statics.