Mitigating the Tragedy of the Commons through Cooperation: An Experimental Evaluation

• Published in: Journal of environmental economics and management Vol. 34; no. 2; pp. 148 - 172
• Main Authors: Mason, Charles F., Phillips, Owen R.
• Format: Journal Article
• Language: English
• Published: New York Elsevier Inc 01-10-1997; Elsevier; Academic Press; Elsevier Science Publishing Company, Inc
• Series: Journal of Environmental Economics and Management
• Subjects: ANALISIS DE COSTOS Y BENEFICIOS; ANALYSE COUT AVANTAGE; Brackish; Co-operation; COMPETENCIA ECONOMICA; CONCURRENCE ECONOMIQUE; Cooperation; COST BENEFIT ANALYSIS; COSTOS DE PRODUCCION; COUT DE PRODUCTION; Economic analysis; ECONOMIC COMPETITION; Economic theory; Economics; Environmental economics; EXTERNALITIES; Firm theory; Freshwater; GESTION DES RESSOURCES; INDUSTRIA; Industrial production; INDUSTRIE; INDUSTRY; Marine; Market economies; Market structure; Market theory; MATHEMATICAL MODELS; MODELE MATHEMATIQUE; MODELOS MATEMATICOS; OLIGOPOLY; ORDENACION DE RECURSOS; PRECIOS; PRICES; PRIX; PRODUCTION COSTS; RESOURCE MANAGEMENT; Studies
• ISSN: 0095-0696; 1096-0449
• DOI: 10.1006/jeem.1997.1006

In a commons, each firm's costs rise with industry output. This externality can be mitigated if firms jointly restrict harvests, but higher prices result. Repeated interaction usually facilitates cooperation that lowers harvest rates. Increased cooperation suggests there should be more firms in the socially optimal market structure. Using experimental markets with two to five “firms,” we observe the influence of industry size on harvest rates. Cooperation increases the socially optimal number of firms in markets when there are static externalities, but not for dynamic externalities. Finally, even when the initial stock is low, there is little tendency toward resource extinction.