1 common-pool resource experiments econ333 fall 2014 copyright james j. murphy. material may not be...
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Common-pool resource experiments
Econ333
Fall 2014
Copyright James J. Murphy. Material may not be reproduced or redistributed without permission.
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Today’s agenda
Your thoughts on the experiment
Common-pool resources in general
Experimental research
Concluding remarks
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Your thoughts on the experiment
What happened and why?
Was the regulation effective? Why?
Was communication effective? Why?
What are some policy implications of the results?
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Common-pool resources
A CPR is a resource that is shared by many people, and utilization by one person affects the welfare of others.Example:Ocean fisheries
If you catch a lot of fish, not only are there fewer fish for me, but they are also harder (and more costly) to find.
Can lead to over-harvesting / destruction of the fishery.
If you don’t catch the fish, someone else will…
Intellectual roots of CPR research
Elinor Ostrom Political Scientist @ Indiana
University 2009 Nobel Prize in Economics Her husband Vincent was a
Consultant on Natural Resources, Alaska Constitutional Convention, 1955–1956.
Helped draft the Natural Resource article for the AK Constitution.
What is do I mean by the “commons”?
Loose definition shared natural resources
Characteristics1. Finite or limited resource (rival in consumption)
2. Resource use subtracts from the stock If I catch a fish, then it’s not there for you
Either:
3a. Difficult to exclude users (non-excludable) e.g, open access fisheries (common pool resource)
or
3b. Common ownership (common property) e.g., communal grazing lands
no private property rights
Examples of common-pool resources
Open-access fisheries
Irrigation systems in developing nations
Communal grazing lands
Forests
Internet bandwidth
Earth’s atmosphere ability to absorb greenhouse gas emissions
Aristotle (384 BC – 322 BC)
“For that which is common to the greatest number has the least care bestowed upon it. Every one thinks chiefly of his own, hardly at all of the common interest.”
H. Scott Gordon (1954)
If ocean resources are rich, why are fishermen poor?Why isn’t this a problem with other natural resources? "overexploitation" in the fishery [is], in
reality, [a] manifestation of the fact that …[these] natural resources are owned in common and exploited under conditions of individualistic competition.”
Garrett Hardin (1968) – Tragedy of the Commons
“Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.”
Gov. William Bradford (1623)
When pilgrims settled in 1620, farmlands were owned in common Not by choice, imposed on
them by investors
By 1623, colony was having trouble feeding itself Theft increased, as did
“illnesses”
At length after much debate of things, [I] (with the advice of the chiefest among them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves. ... And so assigned to every family a parcel of land.”
Gov. William Bradford (1623)
"This had very good success for it made all hands very industrious, so as much more corn was planted than otherwise would have been ...”
The first Thanksgiving celebrated the abundant harvest in 1623.
Törbel, Switzerland
Private land holdings for agriculture Clearly familiar with +/– of
private property
Yet…grazing in communal alpine meadows Common property since 1483 No problems with overgrazing
2 questions Why successful? Why common property?
Common property management in the Swiss Alps
Limited access to citizens No outsiders – land ownership did not automatically
confer communal rights
Wintering rule No more cows than one could feed over the winter Enforced with fines
Rules voted on by citizens Not much different than a modern homeowner’s
association
Why might common property make sense?
Risk-pooling rainfall varies across region
Economies of scale building infrastructure building, maintaining irrigation system
Low productivity, large territory needed
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CPR failure: Mawelle, Sri Lanka fishery
Developed complex rules for who could fish where/when rotation system to share wealth
Population pressure led to more fishing nets by villagers
Govt built a road to Mawelle & ice factory Prices increased 4x
Govt passed laws limiting number of nets Poorly enforced bribes
Entrepreneurs bought shares in multiple nets undermined rotation system
Properties of long-enduring CPRs
Local or regional scale within a single country Villages, watersheds
Users have significant stake in resource Depend upon it for livelihood
Common understanding about how the resource works How their actions affect the resource & each other
Social norms defining proper behavior Might not be formal rules
Trust in others – social capital
Properties of long-enduring CPRs (cont.)
At least some local autonomy Engaged in decisions about resource management
Rules aligned with resource characteristics Adapt quickly to changes
Enforcement mechanism Monitoring behavior Sanction improper use
People often more responsive to social sanctions than financial penalties
“Trust but verify”
Experiments
Predictions about tragedy of the commons based on neoclassical economic model of rational, self-interested agents Model supported in open, competitive markets, esp. in
industrialized societies Not always supported in field studies of local resource
use Mix of motives
Self-interested free-riders Reciprocators (conditional cooperators) Altruists (unconditional cooperators) Conformists
Some lessons learned from CPR experiments
Open access (no rules or property rights) leads to overexploitation
When given opportunity, people can develop institutions (formal & informal) and punish noncompliance
People often more responsive to social sanctions than financial penalties
Weakly enforced rules imposed by external regulators can crowd-out intrinsic motivation
Simply passing a law is not the same as creating an effective institution
Substantial regional variability in responsiveness to formal and informal rules Need to understand local situation Relationship between formal regulations and informal rules likely to be
community-specific
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CPR Institutions
How should shared natural resources be managed to ensure long-term viability?
Will government control over the resource help?Formal, externally imposed rules & regulations
What about group collective action? Informal rules, social norms
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Results from some of our recent CPR experiments in Colombia
What motivates participants? Tested theoretical models of pure self-interest, altruism,
reciprocity, inequity aversion, conformity Model of conformity best explains outcomes
Within and between group effects Communication stabilizes choices within a group, but
different groups converge on different outcomes Reverse is true with penalties
Regional characteristics Relationship between formal and informal rules likely to
be correlated with community characteristics
Early research
For study of commons, or social-ecological systems (SES), both public goods and CPR experiments are relevant. Social dilemmas in which groups are better off
cooperating, but incentives to free-ride
Early lab experiments based on Ostrom, Gardner, Walker (1994) Static environment, multiple rounds
Key Insights
Communication effects Face-to-face communication is just “cheap talk” but has
an incredibly powerful, positive effect on cooperation Even with anonymous, private decisions
Simple promises to reduce harvests led to changes in behavior
People indignant when cheating observed Cheaters improved cooperation after hearing comments
from others
Communication
Still some debate about why communication improves cooperation Not likely due to improved understanding of the game
(Edney & Harper 1978; Kerr & Kaufman-Gilliland 1994) Voicing commitments and development of group identity
& norms (survey by Shankar & Pavitt 2002) May change people’s expectations about others’
decisions e.g., update priors on whether others are reciprocators
Limited communication experiments (Schmitt et al 2000)
Baseline CPR game, varied communication In all treatments, 6 of 8 players could communicate T1: 2 “outsiders” were computers making random
decision between 4-12 T2: 2 “outsiders” were real people with no constraints on
choices T3: 2 “outsiders” were people making constrained
decision between 4-12
Key result Communication is less likely to be effective in preventing
overharvesting when a subset cannot or will not communicate
Does type of communication matter??
Brosig et al (German Econ Review)
Varied pre-play communicationTreatment Verbal
comm.Anonymous interaction
Baseline No Yes
Identification No No. Visual ID
Lecture Passive Yes
Talk-show Passive Yes
Audio-conference Active No. Auditory ID
Video-conference Active No. Audio and visual
Face-to-face Active No. Audio and visual
Also see Cristina Bicchieri & Azi Lev-On. 2007. «Computer-mediated communication andcooperation in social dilemmas: an experimental analysis» Politics, Philosophy & Economics. 6(2):139-168
Heterogeneity
Developing agreements is more difficult with heterogeneous appropriators All will be better off by cooperating, but some
benefit more May fail to cooperate if they cannot agree on a
“fair” distribution of benefits
Hackett, Schlager, Walker 2 levels of endowments 2 x 10-round stages (without/with communication) Without – converge towards Nash With – converge towards cooperative equilibrium
Also papers by Cardenas
Sanctioning experiments
Public goods setting Yamagishi 1986 Popularized by Fehr Gächter 2002
CPR context Ostrom Gardner Walker 1992
See Guala BBS 2012 for critique and open commentary
Ostrom Gardner WalkerAPSR 1992
2 x 10-round stages
Stage 1: baseline
Stage 2: costly punishment Pay $0.05 to $0.20 to impose fines ranging from
$0.10 to $0.80
Results Non-zero levels of sanctioning Directed towards high harvesters Higher levels of cooperation But lower net earnings due to punishment
Mean ContributionsPunishment is pervasive but it does not always increase contributions
Success: Boston, Nottingham, Copenhagen, Bonn, Zurich, St. Gallen, Minsk, Seoul, Chengdu, Melbourne
Failure: Dnipropetrovs'k, Samara, Athens, Istanbul, Riyadh, Muscat
No Punish With Punish
Anti-social punishment
The failure of punishment to increase cooperation is related to amount of “anti-social punishment”
Possible motives for anti-social punishment
Revenge
Induce person to contribute more
Preferences: People with a strong taste for dominance, a competitive
personality, or a desire to maximize relative payoffs might not only punish freeloaders but also cooperators
Dislike for do-gooders, don’t want to be “shown up”
Other sanctioning results
When able to punish back, cooperation decreases (Cinyabuguma, et al 2006; Denant-Boemont, et al 2007; Nikiforakis 2008)
When people can move between groups, they tend to choose the group with sanctioning (Gurek et al 2006)
Initially, most chose without-sanctions But the with-sanctions group did better By end, most chose with-sanctions
Cooperation near 100% and few sanctions needed
Some other studiesMasclet & Noussair
Nonmonetary sanctions Both monetary & non-monetary sanctions can increase initial
cooperation Effectiveness of non-monetary sanctions decays
de Quervain et al. (2004) and Singer et al. (2006) Neural studies—people get pleasure from punishing others
Carpenter (JEBO, 2006) Varied cost of punishing every 3 rounds. Punishment is an ordinary, inferior good (demand decreases as
income increases). Inelastic with respect to both income and price
Also see other work of Jeff Carpenter & Peter Matthews
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Sanctioning exps not without its critics
Fehr & Gächter ascribe motivation as “altruistic punishment.” But…Is it altruism? Or revenge?
Guala BBS No evidence that cooperation is enforced with costly
punishment in small-scale egalitarian societies Challenges concept of strong reciprocity
Strange response from Gintis & Fehr You do not observe costly sanctioning “in the wild”
because it works. The mere threat yields compliance.