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Solving the 'Tragedy of the Commons': An Alternative to Privatization

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Type: Conference Paper
Author: Lipnowski, Irwin F.
Conference: Common Property Conference, the Second Biennial Conference of the International Association for the Study of Common Property
Location: Winnipeg, Manitoba
Conf. Date: September
Date: 1991
URI: https://hdl.handle.net/10535/2114
Sector: Theory
Subject(s): common pool resources--theory
game theory
tragedy of the commons--models
collective action
moral hazard
Abstract: "This paper formulates the 'tragedy of the commons' in game-theoretic terms. The source of this problem is that of moral hazard, wherein the unobservable behaviour of agents who have an incentive to violate a trust induces their anti-social action. Since the outcome of the collective behaviour of all agents is observable, it is possible to devise a rule which penalizes each agent by a sum exceeding the gain which any agent would relize by his or her independent anti-social action. It is shown that an appropriate rule involving collective punishment will provide an incentive structure which induces each rational agent to behave in a socially responsible manner, so that in equilibrium, such penalties will not have to be exercised."

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