SPI Working Paper Series

WP #: 131

Date: Jan 2015


SPI Funded Paper

Voluntary and Mandatory Provision of Common Pool Resources with Heterogeneous Appropriators

    Fatemeh Momeni

    Purdue University

Common pool resource (CPR) users often face two types of problems to solve: provision problems and appropriation problems. This paper presents a laboratory experiment to study the choices of CPR users under different provision schemes, in a heterogeneous environment. In the first two treatment conditions, the level of contribution to the provision process is determined exogenously: in the regressive treatment, poor and rich individuals pay equal amounts to the provision of the resource, and in the progressive treatment, the entire provision cost is paid by rich members. Finally, in the endogenous condition subjects voluntarily choose how much to contribute through the Provision Point Mechanism. The experimental results provide strong evidence for inequality aversion motivating subjects’ decisions. Interestingly, inequality aversion motivates the subjects’ choices differently in the exogenous and in the endogenous provision conditions: in the regressive and the progressive treatments inequality aversion motivates the extraction choices while in the endogenous treatment inequality aversion motivates subjects’ contribution decisions but not their extraction decisions.

SPI Quick Look:
This paper uses a laboratory experiment to compare how different mechanisms of provision of a common pool resource (CPR) affect its consumption by people that have different levels of wealth. Results show that progressive provision schemes that demand more resources from rich group members than poor group members do not induce rich group members to consume the CPR differently than regressive schemes or schemes in which everyone chooses his/her own contribution. On the other hand, provision schemes that allow group members to chooose their own contribution fail 30% of the times to fully provide the CPR.