Sharing, Heterogeneity, and Status Considerations: Incentive Theory and Empirical Evidences

Abstract

"We study whether a linear income sharing rule (pooling system) can achieve Pareto efficiency in a problem of joint exploitation of fishery resources. When agents are selfish, the homogeneity of individual outputs in equilibrium is a necessary condition for the efficient pooling system. When agents exhibit a preference for status (i.e. for being among the well-performing members of the group), the pooling system can be efficient even without this condition. This is because, on the one hand, relative status considerations enlarge the tolerable range of heterogeneity and, on the other hand, it generates an incentive structure that may homogenise individual output performances."