Experimental evidence of common pool resource use in the presence of uncertainty

Ahsanuzzaman Ahsanuzzaman, Leah H. Palm-Forster and Jordan Suter

Journal of Economic Behavior & Organization, 2022, vol. 194, issue C, 139-160

Abstract: Tipping points can occur in many complex environmental systems and often produce abrupt and irreversible change. Thresholds associated with tipping points are difficult to predict in many cases, leading to considerable challenges associated with the management of natural resources. We use a common pool resource (CPR) framework to investigate the impact of different types of threshold uncertainty on CPR use and the efficacy of coordination among group members. Participants in an economic laboratory experiment made decisions on the use of a CPR under three types of threshold treatments – a known threshold (certainty), an uncertain threshold with a known probability distribution of possible thresholds (risk), and an uncertain threshold with an unknown probability distribution (ambiguity). We also tested the effect of communication on coordination among participants in each treatment. We find that while threshold uncertainty (both risk and ambiguity) tends to increase CPR use, communication reduces the use of shared resources and increases social efficiency. Communication reduces the incidence of coordination failure in the presence of both types of threshold uncertainty. A takeaway from our results is that encouraging communication is likely to improve CPR management, while improving information about the probability of specific thresholds may only be useful if thresholds can be identified with certainty.

Keywords: Risk; Ambiguity; Common pool resource; Threshold uncertainty; Communication; Coordination; Resource collapse (search for similar items in EconPapers)
JEL-codes: C71 C92 Q20 Q50 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:194:y:2022:i:c:p:139-160

DOI: 10.1016/j.jebo.2021.12.012

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