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

Marielle Brunette (), Philippe Delacote, Serge Garcia and Jean-Marc Rousselle
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Jean-Marc Rousselle: INRA, UMR 1135 LAMETA

No 2014-06, Working Papers - Cahiers du LEF from Laboratoire d'Economie Forestiere, AgroParisTech-INRA

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.

Keywords: Common-pool resource; Common-pool resource game; deforestation; experimental economics. (search for similar items in EconPapers)
JEL-codes: D71 D81 Q15 Q23 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-04, Revised 2014-04
New Economics Papers: this item is included in nep-agr, nep-exp, nep-ppm and nep-rmg
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http://www6.nancy.inra.fr/lef/Cahiers-du-LEF/2014/2014-06 First version, 2010

Related works:
Journal Article: Commons as a Risk-Management Tool: Theoretical Predictions and an Experimental Test (2020)
Working Paper: Commons as a risk-management tool: theoretical predictions and an experimental test (2020)
Working Paper: Commons as a risk-management tool: theoretical predictions and an experimental test (2012)
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