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Commons as a risk-management tool: theoretical predictions and an experimental test

Author

Listed:
  • Marielle Brunette

    () (Laboratoire d'Economie Forestière, INRA - AgroParisTech)

  • Philippe Delacote

    (Laboratoire d'Economie Forestière, INRA - AgroParisTech
    Climate Economic Chair)

  • Serge Garcia

    (Laboratoire d'Economie Forestière, INRA - AgroParisTech)

  • Jean-Marc Rousselle

    (INRA, UMR 1135 LAMETA)

Abstract

The impact of the safety-net use of Common-pool resources (CPR) on the individual investment into and extraction from the commons is analyzed in this paper. Agents of the community first choose to invest in their private project and in the CPR; second, they choose how much to extract from their private project and the commons. The model compares two types of risk management tool: CPR as risk-coping and risk-diversification mechanisms. It also compares two types of risk: risk on a private project and risk on CPR investment by other community members. The theoretical predictions are empirically tested with experimental economics. In this view, we propose an original CPR game composed of two periods, an investment one and an extraction one. Our result clearly shows that risk reduction in the private project unambiguously decreases investment in the CPR, while it does not impact CPR extraction. We also show that a risk-coping strategy is well understood as more flexible and influenced by the outcome in terms of private project yield.

Suggested Citation

  • Marielle Brunette & Philippe Delacote & Serge Garcia & Jean-Marc Rousselle, 2014. "Commons as a risk-management tool: theoretical predictions and an experimental test," Working Papers - Cahiers du LEF 2014-06, Laboratoire d'Economie Forestiere, AgroParisTech-INRA, revised Apr 2014.
  • Handle: RePEc:lef:wpaper:2014-06
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    File URL: http://www6.nancy.inra.fr/lef/Cahiers-du-LEF/2014/2014-06
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    Keywords

    Common-pool resource; Common-pool resource game; deforestation; experimental economics.;

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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