Appropriation Externalities in the Commons: Repetition, Time Dependence, and Group Size

Abstract

"The use of Common Pool Resources (CPR) generally implies the existence of appropriation externalities. The externality studied in this paper arises because the cost of appropriation is a function of all players' appropriation. We derive the equilibrium predictions and conduct experiments for games in which the appropriation externality is either time independent or time dependent. In the repeated time independent CPR game, the appropriation externality is occurs as the cost of appropriation for each individual in a given decision round is a function of other individuals appropriation round. In the time dependent game, individual appropriation costs are a function of appropriation of all individuals across all rounds, with the cost of appropriation increasing with the life of the CPR. This time dependency exacerbates the appropriation externality at the subgame perfect equilibrium, as appropriators race to utilize the resource. Finally in a result reminiscent of the tragedy of the commons, the appropriation externality is exacerbated as the number of players rises. Preliminary results from experiments with two and five players are presented."