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The tragedy of the commons: the logic of entry and the dynamic process under two scenarios

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  • Hiroaki Hayakawa

    (Universiti Brunei Darussalam)

Abstract

This paper analyzes the dynamics of entry and adjustment that underlies the process leading to the tragedy of the commons under two scenarios, one in which the users only react ex post to the entry of other users and the other in which the users anticipate and proact to such entry. The key to our analysis is the logic of entry based on the devaluation cost, which explains (1) why entry takes place when the incumbent users are in temporary equilibrium, (2) how this equilibrium shifts sequentially with the entry of new users, (3) why such equilibria resemble either the Cournot-Nash equilibrium of a static game or the Stackelberg type equilibrium of a dynamic game depending on the reactive or the proactive nature of the users, (4) why the stocks owned by the users in the proactive case depend on the order of entry and remain unchanged once determined at the point of entry. The speed of depletion, cumulative profits of the users, and the distribution pattern of the ownership differ significantly between the two scenarios. Our theory also explains why and how duopoly and oligopoly emerge through the process of entry and adjustment and acquire different equilibrium features.

Suggested Citation

  • Hiroaki Hayakawa, 2017. "The tragedy of the commons: the logic of entry and the dynamic process under two scenarios," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 7(3), pages 311-328, December.
    • Handle: RePEc:spr:eurase:v:7:y:2017:i:3:d:10.1007_s40822-017-0076-y
    DOI: 10.1007/s40822-017-0076-y
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    References listed on IDEAS

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    1. David Feeny & Susan Hanna & Arthur F. McEvoy, 1996. "Questioning the Assumptions of the "Tragedy of the Commons" Model of Fisheries," Land Economics, University of Wisconsin Press, vol. 72(2), pages 187-205.
    2. Elinor Ostrom, 2010. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," American Economic Review, American Economic Association, vol. 100(3), pages 641-672, June.
    3. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Palgrave Macmillan Books, in: Chennat Gopalakrishnan (ed.), Classic Papers in Natural Resource Economics, chapter 9, pages 178-203, Palgrave Macmillan.
    4. Rouba Al-Fattal, 2009. "The Tragedy of the Commons: Institutions and Fisheries Management at the Local and EU Levels," Review of Political Economy, Taylor & Francis Journals, vol. 21(4), pages 537-547.
    5. Dasgupta, Partha, 1996. "The economics of the environment," Environment and Development Economics, Cambridge University Press, vol. 1(4), pages 387-428, October.
    6. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, vol. 62(2), pages 124-124.
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    Cited by:

    1. Chetan Dave & Sjur Hamre & Curtis Kephart & Alicja Reuben, 2020. "Subjects in the lab, activists in the field: public goods and punishment," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(3), pages 533-553, September.

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    More about this item

    Keywords

    Tragedy of the commons; Logic of entry; Devaluation cost; Additional benefit; Additional cost; Sequential entry; Reaction; Anticipation; Symmetric equilibrium; Asymmetric equilibrium; Unregulated population growth; Duopoly; Oligopoly; Transformation of market;
    All these keywords.

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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