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Output Sharing Among Groups Exploiting Common Pool Resources

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  • Stephan Schott
  • Neil Buckley
  • Stuart Mestelman
  • R. Andrew Muller

Abstract

Many economic decisions are susceptible to either free-riding, or excessive rivalry or overextraction. Equally sharing output in partnerships introduces a free-riding incentive which may offset the latter. We conduct a laboratory experiment to assess the performance of output sharing in partnerships by introducing equal-sharing subgroups of size one, four and six into a twelve-person common pool resource (CPR) environment. Group members are either unchanging throughout a 15 period session (the partners treatment), or randomly reassigned each decision round (the strangers treatment). Group size significantly affects effort. Aggregate effort reflects the Nash equilibrium predictions. The first best solution is achieved when resource users are privately extracting from the CPR and equally sharing their output with the socially optimal number of partners. The strangers treatment does not significantly affect aggregate effort. Total payoff distribution, however, is more equitable for strangers than for partners.

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Bibliographic Info

Paper provided by McMaster University in its series McMaster Experimental Economics Laboratory Publications with number 2004-05.

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Length: 32 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:mcm:mceelp:2004-05

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  1. Kenneth S. Chan & Stuart Mestelman & Rob Moir & R. Andrew Muller, 1998. "Heterogeneity and the Voluntary Provision of Public Goods," Department of Economics Working Papers 1998-04, McMaster University.
  2. Smith, Vernon L, 1985. "Experimental Economics: Reply," American Economic Review, American Economic Association, vol. 75(1), pages 264-72, March.
  3. Andreoni, James & Croson, Rachel, 2008. "Partners versus Strangers: Random Rematching in Public Goods Experiments," Handbook of Experimental Economics Results, Elsevier.
  4. Chan, Kenneth S. & Mestelman, Stuart & Muller, R. Andrew, 2008. "Voluntary Provision of Public Goods," Handbook of Experimental Economics Results, Elsevier.
  5. Parzival Copes, 1986. "A Critical Review of the Individual Quota as a Device in Fisheries Management," Land Economics, University of Wisconsin Press, vol. 62(3), pages 278-291.
  6. Farrell, Joseph & Scotchmer, Suzanne, 1986. "Partnerships," Department of Economics, Working Paper Series qt49d211x4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  7. Hackett Steven & Schlager Edella & Walker James, 1994. "The Role of Communication in Resolving Commons Dilemmas: Experimental Evidence with Heterogeneous Appropriators," Journal of Environmental Economics and Management, Elsevier, vol. 27(2), pages 99-126, September.
  8. Andreoni, James, 1988. "Why free ride? : Strategies and learning in public goods experiments," Journal of Public Economics, Elsevier, vol. 37(3), pages 291-304, December.
  9. Stuart Mestelman, 2004. "Partners and strangers in non-linear public goods environments," Department of Economics Working Papers 2004-02, McMaster University.
  10. Croson, Rachel T. A., 1996. "Partners and strangers revisited," Economics Letters, Elsevier, vol. 53(1), pages 25-32, October.
  11. Brown, Gardner, Jr, 1974. "An Optimal Program for Managing Common Property Resources with Congestion Externalities," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 163-73, Jan.-Feb..
  12. Andereoni, J., 1988. "Why Free Ride? Strategies And Learning In Public Goods Experiments," Working papers 375, Wisconsin Madison - Social Systems.
  13. Isaac, R Mark & Walker, James M, 1988. "Communication and Free-Riding Behavior: The Voluntary Contribution Mechanism," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 585-608, October.
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Cited by:
  1. Matthew J. Baker & Kurtis Swope, 2004. "Sharing, Gift-Giving, and Optimal Resource Use Incentives in Hunter-Gatherer Society," Departmental Working Papers 8, United States Naval Academy Department of Economics.
  2. Martin D. Heintzelman & Stephen W. Salant & Stephan Schott, 2005. "Partnerships: A Potential Solution to the Common-Property Problem but a Problem for a Antitrust Authorities," Levine's Working Paper Archive 784828000000000040, David K. Levine.

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