Can common ownership prevent the tragedy of the commons? : an experimental investigation

We study experimentally a two-stage common pool resource game. In the first stage, selected members of the group determine the level of protection for the resource. The protected fraction of the resource is equally shared among group members. In the second stage, the unprotected fraction of the resource is competed for. We consider three institutions varying in the extent by which subjects participate in the first stage: vote (all group members participate), dictator (only one member decides), and outsider (no one participates). We also vary the initial level of the resource: scarce or abundant. We establish the following results. First, we find that voting provides more frequent protection and leads to higher protection levels than other institutions. Second, collective rent-seeking is larger when the level of the resource is high, but this tendency is sharply reduced in the presence of democratic institutions. Third, collective rent-seeking is negatively affected by the level of protection, but significantly so only when the highest protection level is implemented. These experimental results are stronger in the case of a resource boom than in the case of a resource bust