Income sharing for common pool resources with uncertain productivity

Claudia Kelsall, Martin Quaas and Nicolas Querou
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Claudia Kelsall: CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier, iDiv - German Centre for Integrative Biodiversity Research
Martin Quaas: iDiv - German Centre for Integrative Biodiversity Research

CEE-M Working Papers from CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro

Abstract: We address the interconnected issues of externalities in the use of a natural commonpool resource system and adverse effects of environmental uncertainty on risk-averse resource users. We set up a simple, analytical model, and derive conditions such that insurance by means of an income sharing mechanism mitigates externalities, and hence achieves a socially optimal outcome. For this to materialize, we show that the sharing rule must be sufficiently sensitive to individual contributions, and specifically show that a simple, proportional sharing rule can provide incentives for both, efficient contributions to the income pool and efficient use of the resource system.

Keywords: Resource Economics; Informal Insurance; Risk Aversion (search for similar items in EconPapers)
Date: 2025
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