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Network of Commons

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  • Rahmi Ilkiliç

    (Maastricht University)

Abstract

A tragedy of the commons appears when the users of a common resource have incentives to exploit it more than the socially efficient level. We analyze the situation when the tragedy of the commons is embedded in a network of users and sources. Users play a game of extractions, where they decide how much resource to draw from each source they are connected to. We show that if the value of the resource to the users is linear, then each resource exhibits an isolated problem. There exists a unique equilibrium. But when the users have concave values, the network structure matters. The exploitation at each source depends on the centrality of the links connecting the source to the users. The equilibrium is unique and we provide a formula which expresses the quantities at an equilibrium as a function of a network centrality measure. Next we characterize the efficient levels of extractions by users and outflows from sources. Again, the case of linear values can be broken down source by source. For the case of concave values, we provide a graph decomposition which divides the network into regions according to the availability of sources. Then the efficiency problem can be solved region by region.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2008.30.

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Date of creation: Mar 2008
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Handle: RePEc:fem:femwpa:2008.30

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Keywords: Tragedy of The Commons; Networks; Nash Equilibrium; Efficiency; Centrality Measures;

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References

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  1. Coralio Ballester & Antoni Calvó-Armengol & Yves Zenou, 2004. "Who's Who in Networks. Wanted: The Key Player," Working Papers 178, Barcelona Graduate School of Economics.
  2. H. Scott Gordon, 1954. "The Economic Theory of a Common-Property Resource: The Fishery," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 62, pages 124.
  3. Corominas-Bosch, Margarida, 2004. "Bargaining in a network of buyers and sellers," Journal of Economic Theory, Elsevier, Elsevier, vol. 115(1), pages 35-77, March.
  4. Yukihiko Funaki & Takehiko Yamato, 1999. "The core of an economy with a common pool resource: A partition function form approach," International Journal of Game Theory, Springer, Springer, vol. 28(2), pages 157-171.
  5. Paul Seabright, 1993. "Managing Local Commons: Theoretical Issues in Incentive Design," Journal of Economic Perspectives, American Economic Association, vol. 7(4), pages 113-134, Fall.
  6. Weitzman, Martin L., 1974. "Free access vs private ownership as alternative systems for managing common property," Journal of Economic Theory, Elsevier, Elsevier, vol. 8(2), pages 225-234, June.
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Cited by:
  1. Penelope Hernandez & Edson Manuel Muñoz Herrera & Angel Sanchez, 2011. "Heterogeneous Network Games: Conflicting Preferences," Discussion Papers in Economic Behaviour 0411, University of Valencia, ERI-CES.

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