When the past is present – The ratchet effectin the local commons

In this paper we investigate the effects of local interaction in a CPR-like environment.We employ a local interaction model where subjects are allocated alonga circle and only interact with their most direct neighbors. In traditional socialdilemma experiments, the return of one’s actions is determined by present behaviorwhile past behavior has no influence on the outcome. Yet, current actions oftenact as a benchmark for future outcome - the ratchet effect. In situations wheredilemmas take the form of a public good, ratcheting implies that it is cheaper toincrease public good supply below than above the previous level. Specifically, weargue that the provision of a local public good involves a ratchet effect in productionand that the supply varies depending on the distribution of local contributors.Our major observations are the following: (i) Contributions are discouraged underthe ratchet effect, and (ii) keeping the marginal return of the public good constant,contributions are higher the larger the relative neighborhood size.