The impacts of collective threshold requirements for rewards in a CPR experiment

Rewards for desirable behavior are increasingly being adopted in many regulatory settings. Nevertheless, there is no consensus on how rewards should best be crafted to achieve desired results. This paper focuses on the issue of regulatory design in the context of forest management in Thailand. We run lab-in-field experiments using a common-pool-resource game with villagers in northern Thailand. We study the impacts of varying the collective threshold for obtaining economic rewards on resource extraction, distribution of payoffs and cost efficiency. Three thresholds are studied—strict, moderate, and relaxed, corresponding to low, moderate, and generous targets for group extraction accordingly. We find that rewards are associated with positive conservation outcomes and that their effectiveness depends on the design of the reward instrument. In our setting, strict and moderate thresholds lead to the greatest gains in conservation but differ in important ways. The strict threshold leads to cost efficiency but induces free-riding behavior. The moderate threshold is not as cost-efficient but allows for a more equitable payoffs distribution. The relaxed threshold does not lead to any gain in conservation and is the least cost-efficient. Increasing the reward size can induce a faster achievement of the equilibrium outcome.