inequality differential technology for resource extraction and voluntary collective action in commons abstract due to inequality in distribution of private wealth and market imperfection if individual members in the society have access to different technologies for extraction of common property resources cpr resolving collective action dilemma for efficient use of cpr through voluntary participation becomes a difficult task to lend concreteness to the problem in the context of indian semi arid rural society this paper has chosen one among those very well known cpr management problems viz conservation of water resources for irrigation with the help of a two stage bargaining game model with stage one related to water harvesting and stage two related to agricultural production it shows in terms of an asymmetric nash solution that different types of community programmes based on i equal entitlement right to water and ii switch over to less water intensive agricultural production cannot ensure successful equitable and efficient water management through voluntary participation in the presence of inequality and market imperfection the incentive mechanism to increase efficiency in water use for the purpose of conservation will enhance inefficiency outside the commons water periphery

efficient mechanisms for bilateral trading we consider bargaining problems between one buyer and one seller for a single object the seller s valuation and the buyer s valuation for the object are assumed to be independent random variables and each individual s valuation is unknown to the other we characterize the set of allocation mechanisms that are bayesian incentive compatible and individually rational and show the general impossibility of ex post efficient mechanisms without outside subsidies for a wide class of problems we show how to compute mechanisms that maximize expected total gains from trade and mechanisms that can maximize a broker s expected profit journal of economic literature classification number 026

the ambiguous impact of inequality on local resource management abstract the impact of inequality on the ability of human groups to undertake successful collective action is investigated with special reference to overexploitation of common property resources in voluntary provision problems on the one hand inequality has an ambiguous impact on the feasibility of the efficient outcome even though better endowed agents contribute more to collective action in regulated settings on the other hand inequality tends to reduce the acceptability of available regulatory schemes and therefore to make collective action more difficult

the influence of private contractual failure on regulation the case of oil field unitization an analysis of the interdependence between regulation and private contractual failure reveals that the feasible range of regulation is restricted by the same forces that block private agreement the focus of the study is oil field unitization regulation in oklahoma texas and wyoming federal lands from 1948 through 1975 despite large potential gains from unitization private negotiations fail because of lease heterogeneities and information problems regarding lease value estimates in response the federal and state governments have adopted strikingly different policies to encourage unitization with different results only the federal government s regulations are effective because they surmount information problems texas has the least successful regulation the paper argues that the policy differences are due to the political influence of small firms that benefit from nonunitized production 25 references 2 tables

the effects of nonstationarities on performance in call markets abstract this experiment investigates the responsiveness of laboratory call markets to repetitive systematic shocks in underlying demand or supply conditions results of nine call markets conducted under three treatment conditions are compared with nine previously reported double auctions the informationally sparse call auctions perform no worse than the double auctions allocative efficiency is similar across institutions and call markets appear to track underlying equilibrium price movements more accurately than double auctions

the failure of government sponsored cartels and development of federal farm policy even today most important enduring monopolies or near monopolies in the united states rest upon government policies the government s support is responsible for fixing agricultural prices above competitive levels for the exclusive franchises of public utilities and radio and tv channels for the single postal service the list goes on and on george j stigler 1993 399 i introduction it is often believed that the coercive power of government can overcome the negotiation and enforcement problems that plague private cartels 1 this claim is made in standard microeconomics text books such as hirshleifer s 1984 262 and it is an integral part of the economic theory of regulation stigler 1971 posner 1974 regulation can have the same effect as a successful cartel it raises prices above competitive levels indeed posner 1974 344 46 argues that it may be less costly for industries with large numbers of firms to obtain supportive government regulation than to privately form a carte 2 by capturing regulatory agencies industry can use the state for its own purposes 3 although broadly correct the view that government sponsorship is an effective mechanism for the successful formation of cartels neglects the costs of organizing the industry into an effective lobby group and the costs that politicians face as they attempt to define and enforce total output levels and individual quotas especially in those cases where the industry is large and heterogeneous and hence most needing of government assistance are these costs likely to be significant under these circumstances the industry will lack a consensus on total production targets and firm quotas where the cuts must be large in order to reach price setting goals quota definition and enforcement will be controversial and political opposition will be intense these conditions provide incentives for politicians to modify cartel goals and to seek alternative ways of raising industry prices and incomes accordingly classic government sponsored cartels may not emerge even though the industry has sought state intervention to augment private collective action this point is supported by research in other settings where private negotiations among heterogeneous parties to address common pool problems have failed the usual problem is disagreement over the distribution of costs and benefits and the parties often turn to the state for a solution yet as johnson and libecap 1982 have shown for fisheries and libecap and wiggins 19851 for oil field unitization the distributional problems encountered in private contracting spill over to the political arena causing delays and modifications of regulations in the case of fisheries regulatory authorities adopt policies that maintain status quo rankings of heterogeneous fishermen and expand the stock through fish hatcheries for instance and politically controversial quotas to reduce harvest typically are not introduced until the fishery is seriously depleted in the case of oil field unitization politicians also are unable to resolve conflicts over the definition of unit shares or quotas the same issue that blocks private agreement as a result government imposed unitization generally does not occur until late in the life of the field after many of the common pool losses have already been inflicted even then the unitization rules leave many margins for dissipation uncontrolled 4 this paper argues that the organization costs facing a heterogeneous industry and the political costs facing politicians in responding to its demands for regulation must be given more attention to explain the actual policies that emerge and to predict when agency capture and government sponsored cartel formation will be successful the argument is illustrated by examining the development of new deal agricultural regulation where initial cartel efforts were gradually modified in response to the political opposition of certain farm groups

an economic analysis of the fisheries bycatch problem abstract bycatch is the incidental take of a species that has value to some other group this paper compares open access and individual transferable quota equilibria to the equilibrium in which the joint value of the fisheries is maximized the open access induced problems can be corrected by an individual transferable quota system only if both the target species and the bycatch species have tradable quotas and only if the bycatch species does not have existence value there exists a range of the bycatch to target species harvest levels for which the total harvest of each will be exactly taken by a given technology even under open access however there may not even exist a unique open access equilibrium if bycatch is allocated by rule of capture prohibitions on the sale of bycatch reduce the bycatch level but they also reduce social welfare

contractual responses to the common pool prorationing of crude oil production this paper examines bargaining among firms to mitigate rent dissipation following the major oil discoveries of 1926 35 because of high bargaining costs firms chose prorationing instead of consolidation and unitization and success varied the analysis also shows that prorationing took the form it did because concession such as per well quotas were required to draw in small operations and the quotas led to predictable responses regarding rent dissipation prorationing despite its costs controlled total field production and costs conserved natural reservoir energies and lengthened field life when private agreements failed the parties successfully appealed for state enforcement since similar heterogeneities influnce regulations elsewhere in the economy detailed analysis of bargaining among firms is essential for insight into the emergence of various institutional forms 33 references 3 tables

optimality of the disclosure of private information in a production exchange economy this study provides an analysis of the effects on individual welfare of information revelation in a production exchange economy it is shown that the total effect of information revelation on an agent s utility level may be decomposed into three elements a price effect a shareholding effect and a production effect through this decomposition it is demonstrated that although a pareto improvement need not result from information revelation there are perspectives from which the release can be considered beneficial the major conclusion of previous studies of information revelation in a heterogeneous beliefs economy is that the release will not result in general in an economic equilibrium pareto superior to that which would have existed without the disclosure this result by itself does not give an understanding of how information revelation affects agents utility nor does it give much guidance to those regulatory bodies charged with deciding whether or not to mandate information disclosure this study provides further insight into the effects on individual welfare of information revelation in a general production exchange economy it is shown that the total effect of information revelation on an agent s utility level may be decomposed into three elements a price effect a shareholding effect and a production effect the price effect is the change in the agent s utility caused by the change in prices resulting from the revelation of information keeping shareholdings and production fixed the shareholding effect is the change in his utility resulting from the change in his shareholdings caused by the release of information the production effect is the change in his utility caused by the change in the production plan of each firm due to the information revelation conditions are given under which the signs of these three effects will be positive or negative for a given agent the finding that the production effect is positive for some agents and negative for others is of particular interest since it is counter to a result of arrow and hirshleifer they have argued that owners of production processes gain utility by having information revealed before production plans are fixed because they are then able to adjust those plans to account for the additional information it is shown here that such a conclusion can only be made in general when owners of each production process have homogeneous beliefs finally it is

property rights to multi attribute fishery resources abstract the united nations code of conduct for responsible fisheries urges governments to manage multiple yield bycatch and habitat attributes of fishery resources the information and enforcement costs of multi attribute management are high however as a result relatively few attributes generally stock biomass age structure and growth are specified in yield targets exposing others e g localized abundance sex to excessive use in the public domain spillovers caused by fishing gear e g gear conflicts bycatch habitat damage generally are regulated with catch limits and area closures that artificially divide or exclude activities which interact due to attribute jointness total fishery income is compromised because tradeoffs are not evaluated at the margin alternative arrangements that bundle fishery resource attributes are suggested bundled property rights could evolve from a comprehensive assignment of usufruct rights which reduce the transaction costs of gathering information on unspecified attributes and of contracting for spillovers markets for harvest rights could resolve the simpler gear conflict and bycatch problems other interactions e g predation habitat requirements would require corporate or collective property rights and governance arrangements that make harvesters and other interested parties the residual claimants of their harvest decisions subject to government restrictions that protect public goods

sufficient conditions for public information to have social value in a production and exchange economy conditions are derived under which all consumers in a production and exchange economy will prefer at least weakly disclosure of public information to no such disclosure the conditions involve consumer endowments the allocative efficiency of the financial market and value maximizing behavior by firms cases exist where consumers will prefer disclosure of public information in a production and exchange economy although they would be indifferent to such disclosure in an otherwise similar pure exchange economy the difference in results is due purely to the fact that in production and exchange economies information may be used to reallocate resources across time and firms thus highlighting the fundamental difference between the role of information in pure exchange and in production and exchange economies

can double auctions control monopoly and monopsony power in emissions trading markets abstract we conduct a laboratory experiment to investigate whether the double auction institution can suppress market power in emissions trading markets we study 24 markets with varying market structure in a aba crossover design which controls for subject effects we find clear evidence of successful use of market power average prices rise under monopoly and fall under monopsony opening prices are affected much more than closing prices profits are redistributed in favor of the agent with power efficiency is not affected significantly analysis of convergence trends suggests that this is not a transitory phenomenon we interpret our results as evidence of successful price discrimination within a double auction market

externalities and corrective policies in experimental markets this paper reports on the behaviour of simple laboratory markets which have an externality experiences with these markets provide some help in answering two broad questions 1 do markets with externalities behave in accordance with the law of supply and demand 2 how do the pollution tax pollution standard and pollution licenses compare as methods for correcting the externality

state sponsored violence as a tragedy of the commons england s privateering wars with france and spain 1625 1630 the tragedy of the commons is the familiar problem that open access to a common property resource leads to overexploitation and to zero profits a commons model is applied to an example of state sponsored private violence the practice of privateering or licensed piracy it is predicted that the presence of uncertainty about the value of the prey will reduce the amount of exploitation effort and that industry profits may be positive due to both uncertainty and heterogeneous exploiters using data from england s wars with france and spain between 1625 and 1630 the model suggests that the commons represented by enemy merchant shipping was not overexploited and that privateering profits were positive the dynamic paths of privateering effort ships seized and individual firm profits were however consistent with the normal expectation that commons exploitation will peak and fall as competition drives down returns through entry

new directions in emissions trading the potential contribution of new institutional economics abstract once an arcane topic even among environmental economists emissions trading systems have substantially increased during this past decade in the usa moreover the implementation of these systems has necessitated increased involvement of professionals in many fields besides economics this paper reviews the practical experience of the six major types of emissions trading systems focusing on credit market development participation and results including transaction costs five more recent applications of emissions trading also are considered as well as the possibility of inter pollutant trading while inter pollutant trading has been successfully used for chlorofluorocarbons cfcs the applicability of this experience is probably very limited additionally it would be highly premature to attempt an evaluation of these newer emissions trading systems some of which have yet to be even partially implemented in order to improve these latter and future programs the paper considers the potential contribution of the new institutional economics nie to emissions trading the nie is used to develop theoretical insights and a series of predictions about the performance of a range of emissions trading systems

toward a theory of financial accounting welfare and public information in this paper we employ the concepts of neoclassical welfare economics to consider the role of publicly available information in various market configurations modeling pure exchange economies the need for such a study arises for several reasons first while the existing process of producing and disseminating accounting information may with some oversimplification be described as generating publicly available information there has been no systematic study of the effects of such a process on either the allocational efficiency of a market or on the broader welfare implications of such information for the participants transacting in such a market second the existing literature fails at least to some extent to capture the flavor or spirit of the role of public information in a market setting at first glance it might appear that information would have no social benefit in a pure exchange economy since it does not increase the aggregate supply of consumptive goods across states and dates as will be demonstrated this impression is not justified as a general conclusion the important dimension of information is that it affects perceived risks

investment incentives under emission trading an experimental study this paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits we consider three allocation auction policies auctioning off costly permits through an ascending clock auction grandfathering permits with re allocation through a single unit double auction and grandfathering with re allocation through an ascending clock auction our results confirm both dynamic and static theoretical equivalence of auctioning and grandfathering we nevertheless find that although the market institution used to reallocate permits does not impact the dynamic efficiency from investment it affects the static efficiency from permit trading

integration and productivity satellite tracked evidence this paper introduces satellite tracked real time data from a large fishing firm managing its vertically horizontally and geographically linked ships to study the causal impact of integration on total factor productivity tfp after the firm acquired its vertically unintegrated contractual fish suppliers tfp increased 16 among newly integrated ships whereas it did not vary for already owned ships some classic mechanisms such as increased effort due to monitoring do not systematically explain tfp gains under integration whereas evidence on hold up threat alleviation is mixed importantly enhanced knowledge transfer and hierarchical authority enacting productivity improving operational practices among newly integrated ships are more likely explanations of the results this paper was accepted by bruno cassiman business strategy

appropriable rents from yellowstone park a case of incomplete contracting i introduction though the general populace accepts that national parks are and should be the domain of government the history of our first national park yellowstone reveals that from the beginning private entrepreneurs were actively involved in preserving the amenity values and capturing the amenity rents to appropriate the rents from yellowstone the early entrepreneurs had to carve the amenity values from the common domain or see them dissipated through open access without private ownership of the land this was accomplished through vertical integration of complementary inputs namely transportation services and tourist facilities necessary for the enjoyment of the natural amenities the extent of private sector success or failure in the history of yellowstone can be best understood in the context of the theory of the firm as developed by armen alchian his work with demsetz 1972 and with klein and crawford 1978 expands our understanding of how firms contract to appropriate rents and prevent postcontractual opportunism klein crawford and alchian 1978 300 distinguish between two reasons for vertical integration both of which apply to private firms operating in yellowstone at the time of its creation the first is the successive monopoly problem which occurs when two monopolists supply inputs into a final product or service and the second is postcontractual opportunism our purpose here is to apply these two important threads from the firm s contractual tapestry to the formation and operation of yellowstone national park the central theme is that amenity rents associated with the yellowstone region either could be dissipated through open access and the ensuing tragedy of the commons or appropriated through contractual arrangements that limited entry to the commons the former occurred until the northern pacific railroad with its monopoly on transportation services vertically integrated with monopoly suppliers of tourist facilities and operated the park as if it were privately owned 1 however the potential for rent dissipation still existed because the railroad did not own the park itself and could not effectively contract with the federal government to restrict entry therefore when the federal government opened the park to automobiles in 1915 the railroad s monopoly was eliminated and rent dissipation occurred through congestion ii brief history of yellowstone the natural features of the area that is now yellowstone national park were well known by 1860 following john colter s exploration of the area in 1807 numerous other trappers and later prospectors explored colter s hell in 1865 1870 and 1871 the first formal explorers financed in part by congress were sent to yellowstone these explorers provided scientific information photographs and paintings that increased the awareness in the east about the yellowstone area this awareness culminated in the creation of yellowstone national park by an act of congress on 1 march 1872 making it the first national park though yosemite had been established as a state preserve in 1864 early administration of the park was haphazard because the federal government provided no funds for operating expenses indeed many of yellowstone s natural features were being defaced until in 1886 the u s army assumed administrative responsibilities stationing a cavalry troop there the army stayed until 1918 at the time of yellowstone s creation the region was relatively inaccessible and sparsely settled but railroads changed this the northern pacific railroad completed its transcontinental line in 1883 and immediately added a sixty mile spur from livingston montana to yellowstone s northern entrance in 1903 the chicago burlington and quincy railroad gained access to yellowstone through cody wyoming and in 1908 the union pacific arrived at west yellowstone montana finally in 1915 the park was opened to automobile traffic

common pool resource appropriation under costly cooperation abstract in addition to the usual fixed costs we introduce variable costs in a community s effort to cooperate in extracting from a common pool resource using a standard supervision mechanism these variable costs are shown to be an increasing function of individual members incentives to default the model explains why we frequently observe communities that all cooperate and have relatively similar resource endowments and yet achieve very different levels of extraction

economic spillovers in spatial harvest behavior abstract there has been a strong push within natural resource management to incorporate spatial structure into management regimes however discussions surrounding the appropriate designs of spatial management have largely been conceptual this paper develops a spatial econometric model of fishing location choice using non confidential data from the great barrier reef coral trout commercial fishery harvest location decisions are modeled as a function of spatial patterns of expected economic returns the preferred spatially dependent econometric model is shown to outperform ordinary least squares and fixed effects models in out of sample forecasting estimates from the spatial model reveal spatial spillover effects in fleet harvest location behavior in particular harvest activity at any given site is equally sensitive to same site economic returns and surrounding site economic returns the econometric results are illustrated using a fee based policy simulation results suggest non spatial management is characterized by two inefficiencies first heterogeneity between sites is averaged resulting a fee that is too high or too low across space second fees that are too high or too low affect the fishing effort in nearby locations

coping with asymmetries in the commons self governing irrigation systems can work many analysts presume that the appropriators of a common pool resource are trapped in a hobbesian state of nature and cannot themselves create rules to counteract the perverse incentives they face in managing the resource the logical consequence of this view is to recommend that an external authority the government take over the commons but considerable empirical evidence from field and experimental settings holds that appropriators frequently do constitute and enforce their own rules and that these rules work our research agenda is to develop a coherent understanding of the set of conditions that enhance or detract from self organizing capabilities when individuals differ substantially from one another for the sake of concreteness this paper focuses on the asymmetry present in most irrigation systems between those who are physically near the source of water the head enders and those who are physically distant from it the tail enders this paper first explores the interaction between head end and tail end farmers particularly their decisions about whether to devote resources to the upkeep of the irrigation system and how bargaining between the parties can benefit all sides finally we examine empirical evidence from a study of irrigation institutions in nepal and discuss the broader practical significance of our findings

markets for water rights under environmental constraints abstract the cumulative impact of pollutants on water quality at a given location along a river is a function of prior loadings as well as pollution and surface flows at that particular site the question of whether it is possible to maintain water quality under alternative mechanisms for allocating surface water and pollution rights is addressed we model the optimal allocation of surface water and pollution rights along a river with water quality constraints due to cumulative effects the shadow values of water and pollution rights are contingent on location it is shown that a nash equilibrium in a market for tradable surface water rights in conjunction with a market for pollution damages implements the optimal solution the market supports location specific prices for both consumptive water rights and pollution damages

designing organizations for trading pollution rights regulators and academicians have recently become interested in using a marketable permits program as a new way to control aggregate pollution emissions our research focuses on choosing a permit trading mechanism that is both economically efficient and politically viable we consider an organized trading process and a revenue neutral auction both of which involve an initial allocation of permits based on past history each is tested in a competitive and in a non competitive environment to determine which mechanism performs best the results of our research suggest that overall the organized trading process outperforms the revenue neutral auction

economic prescriptions for environmental problems how the patient followed the doctor s orders o ne of the dangers with ivory tower theorizing is that it is easy to lose sight of the actual set of problems which need to be solved and the range of potential solutions as one who frequently engages in this exercise i can attest to this fact in my view this loss of sight has become increasingly evident in the theoretical structure underlying environmental economics which often emphasizes elegance at the expense of realism in this paper i will argue that both normative and positive theorizing could greatly benefit from a careful examination of the results of recent innovative approaches to environmental management the particular set of policies examined here involves two tools which have received widespread support from the economics community marketable permits and emission charges pigou 1932 dales 1968 kneese and schultze 1975 both tools represent ways to induce businesses to search for lower cost methods of achieving environmental standards they stand in stark contrast to the predominant command and control approach in which a regulator specifies the technology a firm must use to comply with regulations under highly restrictive conditions it can be shown that both of the economic approaches share the desirable feature that any gains in environmental quality will be obtained at the lowest possible cost baumol and oates 1975 until the 1960s these tools only existed on blackboards and in academic journals as products of the fertile imaginations of academics however some countries have recently begun to explore using these tools as part of a broader strategy for managing environmental problems

the role of the public administrations in the promotion of the environmental activity in spanish industrial companies abstract an aim of this study is to analyse the managers opinions in relation to the environmental policy instruments that the public administrations promote in order to force firms to care for the natural environment in the same way we study the relation between the perceived importance of these instruments and the level of collaboration between the public administrations and firms in this area taking into consideration the fact that in spain firms are still in a relatively incipient stage from an environmental standpoint we analyse how these instruments are assessed by managers of spanish industrial firms besides we study whether several opinions are one of the causes of less collaboration in environmental public programs we show that the tightening of the legislation in the environmental area induces a deeper consciousness among companies about the environmental problem because of this and despite having other instruments the public administrations should legislate and enforce the legislation as a first measure of environmental control afterwards we were able to confirm that there does not exist any relation between the importance of the administrative instruments and the perception of the efficacy of these on the part of the managers as they are being implemented nowadays we also confirm that there are no significant differences in the judgement of the importance efficacy relation among those companies that maintain different type of relations with the public administrations in the environmental field this result allows us to arrive at the conclusion that in spite of the differences between the importance and the efficacy that the companies attach to the administrative instruments these differences do not influence the type of relations that the companies maintain with the public administrations in the environmental field therefore it seems that these relations depend on other factors perhaps the level of information of the companies about the public programs or about the necessary resources to have access to them

efficient competitive equilibria with adverse selection do walrasian markets function orderly in the presence of adverse selection in particular is their outcome efficient when exclusive contracts are enforceable this paper addresses these questions in the context of a rothschild stiglitz insurance economy we identify an externality associated with the presence of adverse selection as a special form of consumption externality consequently we show that competitive equilibria always exist but are not typically incentive efficient however as markets for pollution rights can internalize environmental externalities markets for consumption rights can be designed to internalize the consumption externality due to adverse selection with such markets competitive equilibria exist and incentive constrained versions of the first and second welfare theorems hold

emissions trading with shares and coupons when control over discharges is uncertain abstract two important decisions in designing markets for tradable emissions permits are whether to allow banking of permits coupons and whether to allow trading in entitlements to future permits shares banking is predicted to reduce price instability when firms trade in a reconciliation market after the quantity of emissions has been determined tradable shares are a common feature in proposals for emissions trading in canada we conduct a laboratory experiment to investigate how bankable coupons and tradable shares affect efficiency and prices under uncertainty cognitive demands on the subjects are reduced by computerized advice on the optimal allocation of coupons across periods and the implied marginal values of coupons and shares banking share trading and uncertainty conditions are introduced in a complete factorial design with three observations per cell high efficiencies are observed across all treatments uncertainty in the control of emissions leads to substantial price instability when banking is not allowed banking virtually eliminates the instability but reduces the efficiency of the market institution share trading reduces trading volumes increases price stability and improves efficiency

improving efficiency in bilateral emission trading when environmental damages from emissions are spatially nonuniform permit trading has been modeled most often as a pollution offset program in which emission permits are traded between agents subject to constraints on ambient air quality to date the institution envisioned to implement such a program involves trading on a bilateral and sequential basis however simulation studies indicate that the sequence of trades may alter the outcome and undermine the cost savings from a pollution offset program this paper identifies a design for the trading institution that tends to overcome this phenomenon and improve the efficiency of equilibria obtained in a simulation model we model a bilateral trading process for the reduction of sulfur dioxide emissions with a stochastic description of the sequence of trades within groups of nations in europe when trading takes place between disaggregated stylistic representations of economic enterprises rather than between national governments a significantly greater portion of potential savings is achieved in fact under most sets of assumptions approximate first order stochastic dominance is achieved wherein the more decentralized the trading agents the greater the expected savings from a trading program

partial enclosure of the commons abstract we examine the efficiency distributional and environmental consequences of assigning spatial property rights to part of a spatially connected natural resource while the remainder is competed for by an open access fringe we refer to this as partial enclosure of the commons we obtain sharp analytical results regarding partial enclosure of the commons including 1 while second best it typically improves welfare relative to no property rights 2 all resource users can be made better off 3 positive rents arise in the open access area and 4 the resource maintains higher stocks under spatial heterogeneity we also characterize spatial regions that are ideal candidates for partial enclosure typically society should seek to enclose those patches with high environmental productivity and high self retention but whether high economic productivity promotes or relegates a patch may depend on one s objective

fishery management under multiple uncertainty abstract among others who point to environmental variability and managerial uncertainty as causes of fishery collapse roughgarden and smith proc natl acad sci 93 1996 5078 argue that three sources of uncertainty are important for fisheries management variability in fish dynamics inaccurate stock size estimates and inaccurate implementation of harvest quotas we develop a bioeconomic model with these three sources of uncertainty and solve for optimal escapement based on measurements of fish stock in a discrete time model among other results we find 1 when uncertainties are high we generally reject the constant escapement rule advocated in much of the existing literature 2 inaccurate stock estimation affects policy in a fundamentally different way than the other sources of uncertainty and 3 the optimal policy leads to significantly higher commercial profits and lower extinction risk than the optimal constant escapement policy by 42 and 56 respectively

political authority expertise and government bureaucracies by applying the revelation principle we focus on how a sponsor who possesses political authority could minimise the efficiency losses when bureaucrats are experts that is when they control information about the true costs of public services production our results come in striking contrast to those in the literature on bureaucracies and public procurement in a two types setting and in the absence of monitoring and control mechanisms we find that the agency is productively efficient under certain conditions the agency is also allocatively efficient while under others the low cost bureau oversupplies and the high cost agency undersupplies its output

community enforcement of fisheries effort restrictions abstract this paper models the use of community sanctions to restrict effort in a simple gordon schaefer style model of the fishery with heterogeneous fishing costs the withdrawal of cooperation in other areas of life is used to both restrict effort and to sanction those who continue to cooperate with those who have not restricted effort coalition proof nash equilibria are generated by a combination of sanctions discouraging the defection of small groups and stock reductions discouraging noncooperation by large groups both entry restrictions and individual quotas can be supported by community sanctions under some parameter combinations however there are cases where each can generate lower total rents than would be available under open access relatively low cost fishers are more likely to support entry restrictions and ignore community attempts to restrict individual effort while high cost fishers are more likely to support quotas

cooperation spillovers and price competition in experimental markets i introduction both competition and cooperation are important for the successful functioning of many economic systems for example firms compete in markets but they also cooperate with one another through arrangements such as research joint ventures lobbying cooperative marketing agreements and strategic alliances in this paper we use experiments to examine how competitive interactions affect agents propensity to cooperate we are interested in studying spillovers that may involve cooperation in one domain such as a research joint venture and competition in another such as in a market 1 cooperation could weaken competition perhaps promoting collusion or market competition could reduce incentives for non market cooperation these behavioral spillovers could go in either direction they are distinct from another type of spillover through knowledge externalities that occur in research and development r d when the innovator cannot fully appropriate the gains to innovation leading potentially to a socially inefficient level of research debondt 1996 2 as discussed below behavioral spillovers have been shown in experiments to increase cooperation in otherwise competitive environments for example through establishing cooperative precedents a large body of theoretical research has focused on firms cooperating in research joint ventures and how this impacts competition in output markets for example cooper and ross 2009 examine the mechanism by which agreements to cooperate in one market can have negative effects on competition in other markets even in situations when these markets are not linked via costs or demand cabral 2000 shows that product market prices are affected by r d agreements between firms caloghirou ioannides and vonortas 2003 lambertini poddar and sasaki 2003 and poyago theotoky 2007 also discuss the impact of forming research joint ventures on product markets and cartel formation 3 empirical work using field data has provided creative indirect evidence on the collusive potential of research joint ventures by exploiting natural policy experiments although the extent of this evidence is limited goeree and helland 2010 for example show that research joint ventures facilitate collusion because they became less popular following an enforcement policy change leniency that made collusion less attractive policy experiments such as these are often required since systematic collusion often goes undetected by authorities duso roller and seldeslachts 2010 also examine the link between research joint ventures and collusion using data from the u s national cooperation research act that granted certain research joint ventures milder antitrust scrutiny they find that horizontal research joint ventures lead to more collusion than vertical joint ventures our work provides complementary and more direct evidence since in the laboratory we can observe the level and sustainability of tacit and explicit collusion and can therefore circumvent the measurement and endogeneity issues that are often prevalent in field data the specific research goals of this study are the following first we wish to examine if agents take advantage of available gains from cooperation in the presence of payoff uncertainties that arise from stochastic innovation success second we are interested in learning if a behavioral spillover of cooperation can lead to collusion in markets or whether competition in markets reduces non market cooperation these notions of cooperation concern contributions to joint r d projects or collusion in price setting and are defined independently of any communication opportunities therefore our third goal is to determine how this interaction between cooperation and competition is affected by the introduction of non market communication opportunities finally we will measure the externalities from r d cooperation to non innovators in the market

inequality and conservation on the local commons a theoretical exercise to analyse the effect of asset inequality on co operation within a group we consider a twoplayer nonco operative model of conservation of a common pool resource overexploitation by one user affects another s payoff by reducing the next period catch we give necessary and sufficient conditions such that conservation is a nash equilibrium and show that increasing inequality does not in general favour full conservation however once inequality is sufficiently great further inequality can raise efficiency thus the relationship between inequality and economic efficiency is u shaped finally we analyse the implications for conservation if players have earning opportunities outside the commons the daily livelihood of vast masses of the rural poor in many countries depends on the success with which common pool resources cprs such as forest resources grazing lands in shore fisheries and irrigation water are managed and on the environmental consequences of their management understanding the factors that lead to success or failure of community management of these resources is thus critical to rural development cpr management is a collective action dilemma a situation in which mutual cooperation is collectively rational for the group as a whole but individual cooperation is not necessarily individually rational for each member one factor that has not always been recognised as critical to the outcome of collective action dilemmas is heterogeneity among the resource users in this paper our attention will be largely restricted to a single but potent kind of heterogeneity inequality in asset ownership olson 1965 hypothesised that inequality might favour the provision of a public good

implementation issues the political economy of efficient fishing responses to over fishing are very similar efforts begin with gear restrictions area closures and seasonal closures entry restrictions including a license moratorium and a license buyback program often follow the results are similar too over fishing and effort increases continue common property not open access regimes community development quotas cdqs private property regimes individual transferable quotas itqs and pigouvian taxes can produce the optimal amount at the minimum cost of course the details of each are critical political feasibility issues and local conditions are factored into the cdq itq tax decision and the resolution of the key details of each fisher heterogeneity and possible ways to reduce it are especially important issues since over fishing problems initial government responses and results are so common the policy formulation process and recommended outcome have potential global relevance 1999 elsevier science b v all rights reserved

uncertainty and the choice of policy instruments a note on baumol and oates propositions baumol and oates propositions the irrelevancy of benefit uncertainty and the importance of cost uncertainty on the choice between a tax and a system of marketable permits are limited to a large number case in which the opportunities for victims of pollution to participate in a permit market are non existent however with the evolution of environmental groups and coalitions of victims in neighborhoods the large number case can easily transform into a small number case this paper shows that when the pollution standard set at what appears to be optimal ex ante is excessively lenient the system of marketable permits offers such groups a flexibility to buy pollution permits in a competitive market and destroy them until the optimal solution is realized in the reverse situation however baumol and oates propositions are unambiguously valid

instrument choice in a fishery abstract this paper considers the choice of regulatory instruments in a fishery fishing captains consumers and input suppliers each attempt to influence the regulator s choice of instruments the regulator chooses among instruments such as input restrictions entry restrictions or individual transferable quotas itqs regulatory instruments that result in zero fishery rents can only occur if the regulator places an extraordinary weight on the welfare of input suppliers relative to fishing captains and consumers indeed heterogeneity of fishing captains is neither necessary nor sufficient to obtain regulations that fail to generate fishery rents

on the sustainability of common property resources abstract we provide a model where a common property resource is managed by two types of agents cooperators and non cooperators who adjust their extraction strategies in response to persistent differential payoffs in our model the social approval of cooperators works as a reward mechanism which as we show favors both the pervasiveness of cooperative behavior and the sustainable management of natural resources specifically we show that in the presence of such a reward mechanism a stable equilibrium can be reached with both strategies being practiced simultaneously and a decentralized and sustainable management of common property resources is possible

a simple analysis of the us emission permits auctions we examine a stylized version of epa auctions when agents know the list of values of sellers and buyers there are inefficient equilibria where no goods are traded and efficient equilibria where all exchange occurs at a uniform price we also provide examples under incomplete information when the uniform price equilibrium holds and when it does not hold c 1999 elsevier science s a all rights reserved jel classification d44 q29

unraveling the multiple margins of rent generation from individual transferable quotas individual transferable quotas itqs induce changes along both the extensive margin via consolidation of quota among fewer vessels and the intensive margin as harvesters adjust their behavior to itq incentives we use itq introduction in the bering sea crab fishery to decompose the sources of rent generation across both margins we embed an empirically calibrated structural model of the harvesting process into a sector level model allowing us to experimentally unravel the itq treatment we show that the magnitude and source of rent generation under itqs critically depends on the manner and degree of rent dissipation before itqs are implemented

property rights and choice the case of the fishery formal property rights are typically established after considerable waste has occurred despite the effectiveness of such schemes in addressing the inefficiencies of common pool resources adoption can be contentious because of the assignment of wealth and political influence that accompany the transition to exclusive property rights this paper studies how the early involvement of harvesters in policy implementation designed to address the commons inefficiency may foster perceived legitimacy and lessen political opposition to the establishment of individual property rights we demonstrate that it is optimal for a manager facing industry strife and reform delay to allow firms to self select into the property rights regime the strategic interaction of harvesters leads to an equilibrium characterized by the global adoption of property rights thus by providing harvesters with a choice between management systems policy makers can reduce the transaction costs associated with the need to create political consensus while ensuring an outcome similar to the top down implementation of market based management evidence is provided from a recent policy change in maryland fisheries in which the provision of a choice resulted in the overwhelming adoption of individual transferable quotas and the end of the race to fish

buyer liability and voluntary inspections in international greenhouse gas emissions trading a laboratory study this paper reports a preliminary laboratory experiment in which traders make investments to increase the reliability of tradable instruments that represent greenhouse gas emissions allowances in one half of the sessions these investments are unobservable while in the other half traders can invite costless and accurate inspections that make reliability investments public we implement a buyer liability rule so that if emissions reductions are unreliable i e sellers default the buyer of the allowances cannot redeem them to cover emissions we find that allowing inspections significantly increases the reliability investment rate and overall efficiency prices of uninspected allowances usually trade at a substantial discount due to the buyer liability rule which provides a strong market incentive for sellers to invest in reliability

sufficient and necessary conditions for information to have social value in pure exchange this paper extends corrects and unifies earlier statements concerning the social value of public information as well as the no trading conditions in pure exchange sufficient and necessary conditions are provided for both the single period and two period cases in a postsignal trading model the social value of information is shown to be closely linked to the allocational efficiency of the market the degree of homogeneity of prior beliefs and of information structures the time additivity of preferences and the efficiency of endowments we conclude that the case in favor of public information is much stronger than previously suggested

uncertainty and open access implications from the repeated prisoners dilemma game open access refers to situations in which individuals are not excluded from using a scarce resource where natural resources are concerned open access is usually believed to promote depletion as individuals rush to obtain as much as they can before other claims are made this phenomenon has been blamed for many important natural resource problems including overexploitation of fisheries johnson and libecap decimation of tropical forests by wood gatherers eckholm and excessive grazing on rangeland libecap and johnson in such cases the exercise of selfinterest runs counter to the collective interest of all resource users and if pursued generally is self defeating solutions to such problems must begin with restraints on the actions of interested parties but what will lead fishers or woodgatherers or shepherds to develop such restraints are the incentives for voluntary restraints sufficiently strong or must the restraints be imposed by authoritarian rules that can override individual interests i am interested here in whether uncertainty encourages or discourages voluntary restraint in the use of open access resources two types of uncertainty may influence the emergence of voluntary restraints first there is behavioral or strategic uncertainty individuals who are interdependent as in open access situations may be presumed to act based on their expectations of others actions if those actions cannot be perfectly predicted and assured each participant must plan according to some probability distribution over the actions available to others it has been argued that uncertainty may facilitate voluntary agreements among parties for whom noncooperative behavior is clearly rational and whose interactions are repeated axelrod and kreps et al this argument and its implications for open access resource problems are examined critically in the next section of this paper the second type of uncertainty stems from ature and markets for example forage or ish stocks may fluctuate from season to season from natural causes prices of livestock or fish may vary because of economic forces these exogenous sources of variability create uncertainty of outcomes apart from behaviors of others the importance of this kind of uncertainty is considered in the third section of this paper to assess the consequences of these sources of uncertainty i refer to the repeated prisoners dilemma game e g axelrod kreps et al and taylor in this framework pursuit of self interest is always dominant economically in the short term although it results in suboptimal collective returns the stark conflict between individual and collective interests appears to reflect conditions with open access however three major limitations of the model should be noted at the outset first it allows only for binary choices and a fixed number of players many open access problems involve continuous choices and an unrestricted number of players second the game does not permit forward contracting or side payments between individuals this precludes many devices used in reality to facilitate voluntary transactions third the game remains the same period after period no intertemporal externalities are reflected these john b braden is an associate professor department of agricultural economics university of illinois this research has been supported by grants from the illinois agricultural experiment station no 1 6 53491 and the illinois water resources center no 1 11381 uncertainty is used here interchangeably with risk both refer to variability of outcomes due to forces beyond an individual s control

market power in tradable emission markets a laboratory testbed for emission trading in port phillip bay victoria abstract in theory competitive emission permit markets minimize total abatement costs permit markets are often imperfectly competitive however and may be thin and dominated by large firms the dominant firm s could exercise market power and increase other firms costs of pollution control while reducing their own emission control costs this paper reports a testbed laboratory experiment to examine whether a dominant firm can exercise market power in a permit market organized using the double auction trading institution our parameters approximate the abatement costs of sources in a proposed tradable emissions market for the reduction of nitrogen in the port phillip watershed in victoria australia we vary across treatments the initial allocation of permits to sources so that in one treatment the seller of permits is a monopolist and in another treatment the market is duopolistic we also vary the information that subjects have about the number and abatement costs of their competitors we find that prices and seller profits are higher and efficiency is lower on average in the monopoly sessions compared with the duopoly sessions but the differences are not substantial and are not statistically significant due to pronounced variation across sessions moreover prices profits and transaction volumes are usually much closer to the competitive equilibrium ce than the monopoly equilibrium

a framework for evaluating collective action and informal institutional dynamics under a resource management policy of decentralization the decentralization of resource property rights has become an increasingly popular policy in many natural resource dependent communities of the developing world however the success of this policy approach depends on both collective action and institutionalization it is therefore important to evaluate collective action and institutionalization where the process of property rights decentralization is in progress this paper presents a modified version of the institutional analysis and development iad framework designed to analyze the decentralization of property rights and the collective action of community members to obtain these rights it describes a three phased framework for analyzing i the government property right decentralization policy ii the stock of capital assets in the community required to achieve property rights by initiating collective action and iii the development of an informal institution for effective property right distribution in the community finally to demonstrate its utility to collective action research we present a case study application of our modified framework to the fisheries property right decentralization policy of the bangladesh government and the subsequent collective action of a wetland dependent community

restraint under open access are voluntary incentives sufficient or is coercion required discussion in describing the inefficiencies of open access fisheries earlier writers e g gordon relied heavily on some simplifying assumptions in particular it was assumed that inputs effort were homogenous and their supply to the industry was perfectly elastic the potential for cooperation among the individual participants was ignored the end result after some hand waving was that entry would lead to the complete dissipation of the rental value of the resource this particular open access model with its average product argument has been applied to other resource areas and is widely evident in the public choice literature despite the widespread application of the model there remains skepticism about its predictive powers and the policy implications drawn from it three of the four papers presented at this session are reflective of that skepticism in that regard they are not alone one can for example find numerous anthropological studies arguing that communities have on occasion established informal arrangements for controlling entry and the use of resources in such areas as fishing and grazing a distinctive feature of many of those studies is a cautious approach to the full dissipation implication found in the traditional open access model the traditional model has been criticized because it ignores the potential for cooperation and instead treats producers as though they were a sack full of ornery cats johnson p 246 furthermore challenges to the complete dissipation argument are not restricted to anthropological literature experiments involving finite repetition of the prisoners dilemma game suggest that players do not always follow the single period dominant strategy defection instead they achieve some measure of cooperation finally there is the existence of institutions such as nature groups who finance the purchase of lands even where benefits accrue to numerous individuals who were not a party to the transaction in those cases it appears that the free rider problem does not completely dominate the outcome if however full dissipation does not occur does it then follow that some form of explicit cooperation with internally imposed rules and sanctions has evolved the answer appears to be no first individual participants may not be homogenous and thus the supply function of effort is not perfectly elastic in that case the rental value of the resource need not be

the dynamic efficiency costs of common pool resource exploitation we conduct the first empirical investigation of common pool resource users dynamic and strategic behavior at the micro level using real world data fishermen s strategies in a fully dynamic game account for latent resource dynamics and other players actions revealing the profit structure of the fishery we compare the fishermen s actual and socially optimal exploitation paths under a time specific vessel allocation policy and find a sizable dynamic externality individual fishermen respond to other users by exerting effort above the optimal level early in the season congestion is costly instantaneously but is beneficial in the long run because it partially offsets dynamic inefficiencies jel d24 q21 q22

modeling effort and lobbying in a heterogeneous common pool resource setting extraction from a common pool resource cpr such as a fishery can lead to socially inefficient and undesirable outcomes as a result of appropriation problems through regulation of the cpr users may achieve a more profitable and socially efficient outcome feeny et al land econ 72 2 187 205 1996 delve into some of the assumptions made by traditional cpr models and how use of those assumptions provides an incomplete framework to guide fishery policy in the theoretical models we develop we relax two of those assumptions cpr users are homogeneous and are unable to create or influence management of the resource we note a case where regulation of the individual user can induce others to harvest more and relate this to the slippage effect concept regarding resource sustainability we document situations where incentives exist for cpr users to lobby for tighter regulations and thus increase profits by limiting the tragedy of the commons influence

contracting problems and regulation the case of the fishery the inefficiencies of common property fisheries are of continuing concern to economists the early work by scott gordon 1954 and anthony scott 1955 outlined the problem and later studies by james crutchfield and giulio pontecorvo 1969 and frederick bell 1972 provided empirical estimates of the losses that result those studies were followed by the dynamic models of colin clark 1976 and james quirk and vernon smith 1970 of optimal harvest rates and the use of corrective taxes or quotas to achieve them but in spite of a large and growing literature and the persuasiveness of the outlined efficiency criteria most fisheries retain common property aspects with overcapitalization and excessive labor input why those conditions persist and the failure of the regulatory response to them are the issues addressed in this paper we examine a number of fisheries but focus on the texas shrimp industry which is one of the nation s most valuable fisheries for a single species and which shares the common property characteristics observed elsewhere it is considered overcapitalized and catch per unit of effort is falling 2 examination of the fishery reveals the many margins along which rent dissipation occurs and the nature of the regulations necessary for controlling fishing effort to avoid those losses the regulatory environment in texas is complicated by conflict within the fishery between inshore and offshore fishermen the latter assert that bay shrimping reduces the number of shrimp that successfully migrate to the gulf the inshore fishery is highlighted by another issue the recent resettlement of some 30 45 000 vietnamese refugees including many fishermen along the texas coast marine advisory service paul starr their entry has been met by hostility and violence from existing shrimpers who recognize that they are in an environment characterized by the absence of property rights bay shrimpers have lobbied the texas legislature for broad limits on new entrants yet ironically the sale of additional boats by individual shrimpers to the vietnamese has facilitated entry of the refugees into the fishery regulations in the texas shrimp and other fisheries are incomplete leaving many options for rent dissipation uncontrolled because of high contracting costs among fishermen and political factors that mold government actions contracting costs are high among heterogeneous fishermen who vary principally with regard to fishing skill 3 montana state university and texas a m university respectively we benefitted from comments by terry anderson raymond c battalio gardner brown oscar burt micha gisser wade griffin john r moroney anthony d scott peter temin and participants in workshops at texas a m university and the university of washington research assistance was provided by scott barnhart and phil mizzi funding was provided by sea grant texas a m university throughout this paper we use the terms common property and open access interchangeably here the terms describe a situation where no property rights group or individual exist s for the resource 2catch per unit of effort in the inshore texas gulf and federal gulf waters is presented for 1963 77 by w l griffin c g tydlacka and w e grant they show catch per unit of effort generally falling in inshore and offshore waters while catch per unit of effort fluctuates from year to year it falls from approximately 360 kg shrimp per unit of effort to 220 kg from 1963 to 1977 the common property nature of the fishery is reflected in the following statistics since 1975 the number of vessels has grown by 23 percent nelson swartz for fish houses the record of entry is similar between 1970 a d 1977 the number of firms grew from 259 to 287 though during that period many left the industry as others entered the number of fish houses was calculated from license data supplied by the texas parks and wildlife department the record of entry by fish houses suggests that monopsony as discussed by colin clark and gordon munro is absent in the fishery 3there may be minor differences in labor leisure choices and capital but our statistical evidence and discussions with fishermen indicate that catch variations are largely due to skill government regulations in the texas bays restrict capital and our empirical evidence shows boats to be relatively homogeneous

explaining state bans on corporate farming state laws banning corporate farming present a puzzle for a rent seeking explanation of political outcomes since family farmer proponents may receive no direct benefit from these bans an explanation developed here is that these farmers benefit indirectly forestalling corporate entry preserves the farm political coalition structured around those cooperatives patronized by family farmers and so indirectly preserves federal subsidies and supply restrictions that the incidence of state bans is positively related to the importance of federal farm programs the importance of cooperatives and the homogeneity of farmers within a state is consistent with this indirect rent seeking explanation

auctioning vs grandfathering in cap and trade systems with market power and incomplete information we compare auctioning and grandfathering as allocation mechanisms of emission permits when there is a secondary market with market power and firms have private information on their own abatement technologies based on real life cases such as the eu ets we consider a multi unit multi bid uniform auction at the auction each firm anticipates its role in the secondary market either as a leader or a follower this role affects each firms valuation of the permits which are not common across firms as well as their bidding strategies and it precludes the auction from generating a cost effective allocation of permits as it occurs in simpler auction models auctioning tends to be more cost effective than grandfathering when the firms abatement cost functions are sufficiently different from one another especially if the follower has lower abatement costs than the leader and the dispersion of the marginal costs is large enough

does inequality lead to greater efficiency in the use of local commons the role of strategic investments in capacity abstract this paper examines how inequality in access to credit affects the strategic behavior of users of a common resource in their investment and extraction decisions a dynamic two stage game is developed in which agents choose the level of sunk investment in capacity and the consequent extraction path the results show that agents invest in excess capacity except when inequality is very high the relation between inequality and efficiency in resource extraction is found to be non monotonic with the steady state resource stock being closest to the optimal level when either inequality is very high or very low

the rate at which a simple market converges to efficiency as the number of traders increases an asymptotic result for optimal trading mechanisms private information in an independent private values market provides incentives to traders to manipulate equilibrium prices strategically this strategic behavior precludes ex post efficient market performance increasing the number of traders improves the efficiency of some trading mechanisms by enabling them to better utilize the private information traders bids and offers reveal this paper shows that the expected inefficiency of optimally designed mechanisms relative to ex post efficient allocations decreases almost quadratically as the number of traders increases

in praise of inequality public good provision and income distribution abstract it is shown that if all individuals contribute towards the provision of a public good their utilities are equalised even if the income distribution is unequal it may seem that there is then no role for redistributive policy but it is proved that social welfare can be raised by creating sufficient income inequality that only the rich provide public goods

efficiency in auctions with failed resale abstract the possibility of resale affects efficiency in multi object uniform price auctions with asymmetric bidders we theoretically show that when the exogenous probability of a resale market is sufficiently low final efficiency is lower than in an auction without resale our experimental design consists of four treatments that vary the probability that bidders participate in a resale market resale always increases efficiency compared to the auction allocation but it also induces demand reduction by high value bidders which reduces auction efficiency consistent with theory and in contrast to what is usually argued the possibility of resale may reduce final efficiency and changes in the probability of resale have a non monotonic effect on efficiency we also analyze bargaining chat data to provide insights into the functioning of resale markets