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Sharing rules for a Common-Pool Resource with private alternatives

  • Marianne Lefebvre
  • Sophie Thoyer
  • Mabel Tidball
  • Marc Willinger

Agents with ex-ante claims over a common pool resource (CPR) of uncertain size face the risk of resource shortage if the sum of the claims they have over the common pool resource is incompatible with the actual resource size. In case of shortage, a sharing rule or bankruptcy rule is required to organize the restrictions and allocate the available resource among CPR users. However, in many situations, agents can diversify their resources and substitute an alternative safe but costly resource to the free but risky CPR. Optimal resource management requires to study the interaction between the sharing rule of the CPR and the resource diversication choices of agents. We find the optimal sharing rule under two assumptions concerning the regulator: i) the social planner denes simultaneously the sharing rule and the diversication choices in order to maximize social welfare; ii) the policy maker uses the sharing rule as an instrument to induce and each agent to make the optimal diversication decision. We interpret our results in the context of water management in France.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2011-11.pdf
File Function: First version, 2011
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Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 11-11.

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Length: 29 pages
Date of creation: May 2011
Date of revision: May 2011
Handle: RePEc:lam:wpaper:11-11
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