Appropriation Externalities in the Commons: Theory and Experimental Evidence

"A common-pool resource (CPR) is defined as any resource in which exclusion is difficult and consumption of resource units is rival. Examples of CPRs include groundwater basins, fisheries, forests, grazing ranges, and irrigation systems in which property rights--or the ability to uphold such rights--do not allow for privatization. In situations where these characteristics exist, the predicted outcome is overuse of the resource relative to the social optimum, commonly known as the 'tragedy of the commons.' This dissertation combines the tools of game theory and experimental methods to gain a broader understanding of the incentives that underlie this prediction. "First, an extensive analysis of a game theoretic CPR model is conducted. A distinction is made between two types of appropriation externalities: those that are restricted to a single period (time-independent), and those that occur across several periods (time-dependent). This study examines the impact of various factors--including group size, heterogeneities, myopia, and the ability of appropriators to commit to an extraction path--on the predicted outcome of the CPR game. The behavioral impacts of time-dependency and group size are then examined in a controlled experimental setting designed to capture the essential features of the model. "While the equilibrium of the game theoretic model provides a fairly accurate prediction of aggregate outcomes, it fails to satisfactorily explain behavior at the individual level. Most notably, individual behavior in time-dependent designs is characterized by myopia, in the sense that subjects appear not to consider the full impact of their current decisions on future payoffs. This myopic behavior exacerbates the predicted tragedy of the commons."