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Water Externalities: Tragedy of the Common Canal


  • Charles A. Holt

    () (Department of Economics, University of Virginia, 237 Monroe Hall, Charlottesville, VA 22904-4182, USA)

  • Cathleen A. Johnson

    () (BASIS Educational Group, 1715 E, Skyline Drive, Suite 121, Tucson, AZ 85718, USA)

  • Courtney A. Mallow

    () (Chemonics, 1717 H Street, NW, Washington, DC 20006, USA)

  • Sean P. Sullivan

    () (Department of Economics & School of Law, University of Virginia, 237 Monroe Hall, Charlottesville, VA 22904-4182, USA; corresponding author)


Laboratory experiments are used to investigate alternative solutions to the allocation problem of a common-pool resource with unidirectional flow. Focus is on the comparative economic efficiency of nonbinding communications, bilateral “Coasian” bargaining, allocation by auction, and allocation by exogenous usage fee. All solutions improve allocative efficiency, but communication and bilateral bargaining are not generally as effective as market allocations. An exogenously imposed optimal fee results in the greatest allocative efficiency, closely followed by an auction allocation that determines the usage fee endogenously.

Suggested Citation

  • Charles A. Holt & Cathleen A. Johnson & Courtney A. Mallow & Sean P. Sullivan, 2012. "Water Externalities: Tragedy of the Common Canal," Southern Economic Journal, Southern Economic Association, vol. 78(4), pages 1142-1162, April.
  • Handle: RePEc:sej:ancoec:v:78:4:y:2012:p:1142-1162

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    Cited by:

    1. Stoddard, Brock & Walker, James M. & Williams, Arlington, 2014. "Allocating a voluntarily provided common-property resource: An experimental examination," Journal of Economic Behavior & Organization, Elsevier, vol. 101(C), pages 141-155.
    2. Pfaff, Alexander & Vélez, Maria Alejandra & Ramos, Pablo Andres & Molina, Adriana, 2015. "Framed field experiment on resource scarcity & extraction: Path-dependent generosity within sequential water appropriation," Ecological Economics, Elsevier, vol. 120(C), pages 416-429.

    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices


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