"Follow the Data" What Data Says About Real-world Behavior in Commons Problems

Caleb M. Koch and Heinrich H. Nax
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Caleb M. Koch: Department of Humanities, Social and Political Sciences, Eidgen'ssische Technische Hochschule Z'rich
Heinrich H. Nax: Department of Humanities, Social and Political Sciences, Eidgen'ssische Technische Hochschule Z'rich

No 2198, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We test the game-theoretic foundations of common-pool resources using an individual-level dataset of groundwater usage that accounts for 3% of US irrigated agriculture. Using necessary and sufficient revealed preference tests for dynamic games, we find: (i) a rejection of the standard game- theoretic arguments based on strategic substitutes, and instead (ii) support for models building on reciprocity-like behavior and strategic complements. By estimating strategic interactions directly, we "nd that reciprocity-like interactions drive behavior more than market and climate trends. Taken together, we take a step toward developing more realistic models to understand groundwater usage, and related issues pertaining to tragedy of the commons and commons governance.

Keywords: Common-pool resources; US agriculture; Groundwater; Dynamic game theory; Revealed preferences; Panel data; Identification (search for similar items in EconPapers)
Pages: 69 pages
Date: 2019-11
New Economics Papers: this item is included in nep-gth, nep-his, nep-hpe and nep-pke
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