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Sharing Rules for Common-Pool Resources when Self-insurance is Available: an Experiment

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  • Marianne Lefebvre

Abstract

A laboratory experiment is used to analyze how the rule used to allocate a CPR in case of shortage impacts the individual trade-o between relying on a free but uncertain CPR and investing in a secure alternative resource, which constitutes a self-insurance. I compare three rules from the bankruptcy literature (contrained-equal awards, constrained- equal losses, proportional) and a rule that allocates no resource in case of shortage. I find that the best coordination institution towards the optimal level of self-insurance is the no allocation rule. However, eciency and reliability are higher with the constrained-equal awards rule. Rules which are dened as a proportion of claims, such as the proportional and constrained-equal losses rule induce sub-optimal levels of self-insurance. Results are interpreted in the context of water management in France.

Suggested Citation

  • Marianne Lefebvre, 2011. "Sharing Rules for Common-Pool Resources when Self-insurance is Available: an Experiment," Working Papers 11-22, LAMETA, Universtiy of Montpellier, revised Jun 2012.
    • Handle: RePEc:lam:wpaper:11-22
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    File URL: http://www.lameta.univ-montp1.fr/Documents/DR2011-22.pdf
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    4. Erik Ansink & Carmen Marchiori, 2015. "Reallocating Water: An Application of Sequential Sharing Rules to Cyprus," Water Economics and Policy (WEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(04), pages 1-22, December.

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