 Can Rationing Rules for Common Resources Impact Self-insurance Decisions?Strategic Behavior and the Environment, 2013, vol. 3, issue 3, 185-222 Abstract: When users have ex-ante demands over a common resource and when resource size is not sufficient to cover all the individual demands, there is a need to establish a rationing rule. I test whether the choice of the rationing rule impacts the individual decision to self-insure, i.e., to invest in a secure alternative resource, instead of relying on a free but uncertain common resource. Four rationing rules, empirically relevant for water management, are compared using a laboratory experiment. According to Nash predictions, the investment in self-insurance is the same with the four rules. However, the experimental data show that agents' decisions are impacted by the rule. Coordination on the optimal self-insurance level is higher with the no allocation rule. However, total gains are higher with the constrained-equal awards rule, and their variability is reduced. Rules which are defined as a proportion of posted demands, such as the proportional and constrained-equal losses rules, induce sub-optimal levels of self-insurance. Keywords: Bankruptcy; Common-pool resource; Coordination; Experiment; Risk aversion; Self-insurance; Rationing rules; Water management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:now:jnlsbe:102.00000029 Access Statistics for this article More articles in Strategic Behavior and the Environment from now publishers |
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