An Empirical Comparison of Behavioural Responses from Field and Laboratory Trails to Institutions to Manage Water as a Common Pool Resource

"There has been extensive debate in the experimental economics literature as to the validity of extending the results of student experiments to more complex real world settings, characterised by the economic behaviour of diverse participants. This paper uses an experimental design that formally compares the behavioural responses of irrigator and student participants to different institutions and instruments to manage water as a common pool resource. The irrigator subject pool was drawn from land holders in the Daly River, Katherine and Darwin Catchments, Northern Territory Australia. The students were randomly selected from a pool of undergraduates at Griffith University, Brisbane, Australia. The design combines the use of an environmental levy with community involvement in the formation of group agreements and strategies to explore the impact of information and communication on water use in a complex heterogeneous environment. Participants in the experiments acted as farmers faced with monthly water demands, uncertain rainfall, possible crop loss and the possibility of trading in water entitlements. The treatments included (a) no information on environmental consequences of extraction, (b) the provision of monthly aggregate environmental information, (c) the provision of monthly aggregate extraction information and a forum for discussion, and (d) the public provision of individual extraction information and a forum for discussion giving rise to potential verbal peer sanctions. To account for the impact of trade the treatments were blocked into two market types: no trade and a closed call clearance market. The simulated environmental flows provide equal public benefits to all experimental participants. The cost to the community of altering the natural flow regime to meet extractive demand was socialised through the imposition of an environmental levy equally imposed on all players. The field and laboratory results are compared."