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

  • Marianne Lefebvre

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.

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File URL: http://www.lameta.univ-montp1.fr/Documents/DR2011-22.pdf
File Function: Second version, 2012
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Paper provided by LAMETA, Universtiy of Montpellier in its series Working Papers with number 11-22.

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Length: 47 pages
Date of creation: Nov 2011
Date of revision: Jun 2012
Handle: RePEc:lam:wpaper:11-22
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