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Conference Paper Who Needs Formal Regulations to Manage the Commons? The Rural Charters in Northern Italy(2000) Casari, Marco"According to the Folk theorems, a tragedy of the commons outcome can be avoided provided that the users are sufficiently patient and that their interaction is infinitely repeated. That seems to have been the situation of the villages on the Italian side of the Alps (Trentino), which held forests and pastures in common for centuries (1200-1800). "Instead of relying on informal regulations, however, the users created formal institutions to limit the over-exploitation of the resources through written legal documents called rural Charters (Carte di Regola ). Was the choice inefficient or were informal regulations not able to support full cooperation? "Some degree of formal regulations was necessary to ensure that basic requirements of the Folk theorem, such as repeated interaction and protection from outsiders, were met. Through the rural Charters the local communities obtained from the political authorities some legislative power to self-regulate and locally enforce formal institutions. For instance, the long-term relationship within a community was ensured by a specific property rights arrangement on the land that locked the insiders in. "Since the resource users could only imperfectly monitor one other, the outcome of informal institutions was in general sub-optimal. I adopt the Green-Porter model to interpret the historical situation. The alternative of a legal sanctioning system entailed explicit costs to be set up and maintained, but might have provided a better arrangement also, because it avoided the deadweight losses associated with punishment actions of informal regulations. "In conclusion, it is well possible that formal regulations could have performed better on an efficiency ground than informal regulations."Conference Paper Keeping an Eye on Your Neighbors: Agents Monitoring and Sanctioning One Another in a Common-Pool Resource Environment(2000) Casari, Marco; Plott, Charles R."The role of a specific institution in avoiding a 'tragedy of the commons' situation in a common pool-resource environment is studied experimentally. The resource users privately decide their own exploitation level and then, once the group outcome is revealed, can choose to select other individuals for inspection. At a cost the inspector can view the decision of any individual. If the inspected individual has exploited the resource excessively, relative to a publicly known amount, a fine is imposed and paid to the inspector. The rules were modeled after a historical case of self-governed rural communities in Northern Italy. "The introduction of the sanctioning institution greatly improves the efficiency of the group outcome from the initial level of severe 'tragedy.' The classical model with homogeneous, self-interested agents cannot explain these results. We present a model with heterogeneous, other-regarding agents that is compatible with both the resource use and the inspection decision patterns. In particular, differences in altruism/spite can explain the wide diversity of individual behavior and the willingness of spiteful agents to request unprofitable inspections help explaining the high inspection rate."