Two Versions of the Tragedy of the Commons
AbstractThe commons are a one input-one output production process with increasing marginal cost. In the average return game, each agent chooses his input contribution and total output is shared in proportion to individual contributions. In the average cost game, each agent chooses his output share and total input cost is shared in proportion to individual demands. The tragedy is that the non cooperative equilibrium results in inefficient overutilisation of the technology. We prove formally the tragedy when preferences are convex and both goods are normal. This result has not bee proved previously on such a general preference domain. We also show that overutilisation is less severe in the average cost game than in the average return game.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 95-04.
Date of creation: 1995
Date of revision:
Publication status: Published in ECONOMIC DESIGN, Vol. 2, 1997, pages 399-421
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Other versions of this item:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
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