Abstract
Economic Experimental Games have shown that individuals make decisions that deviate down from the suboptimal Nash equilibrium. However, few studies have analyzed the case when deviation is above the Nash equilibrium. Extracting from above the Nash equilibrium is inefficient not only socially but also privately and it would exacerbate the tragedy of the commons. That would be the case of a race to the fish when stocks are becoming depleted or driver behavior on a highly congested road. The objective of this study is to analyze private inefficient extraction behavior in experimental games and to associate the type of player and the type of player group with such inefficient outcomes. To do this, we carried out economic experimental games with local coastal fishermen in Colombia, using a setting where the scarcity of the resource allows for an interior Nash equilibrium and inefficient over-extraction is possible. The state of the resource, the type of player and the composition of the group explain, in part, this inefficient behavior.
Highlights
Conflicts associated with common-pool resources (CPR) have been widely studied in the economic literature, including in the fields of game theory and behavioral and experimental economics
The objective of this paper was to analyze inefficient extraction behavior in experimental games where scarcity of the resource constrains the possibilities of pro-social behavior and to associate the type of players to such outcomes
We developed an EEG for a CPR with real fishing communities in the Colombian Caribbean, and simulated two stock levels, which in turn generated two Nash equilibriums
Summary
Conflicts associated with common-pool resources (CPR) have been widely studied in the economic literature, including in the fields of game theory and behavioral and experimental economics. In CPR games the Nash equilibrium determines the private efficient level of extraction. Deviations below the Nash equilibrium may reflect collective behavior or others-regarding preferences, as individuals may incorporate a consideration of collective interests in their individual extraction decisions. When individuals extract more units than those predicted by the Nash strategy and so the deviation is above the Nash equilibrium, the conclusion is that they are being highly inefficient, inasmuch as they are making decisions that negatively impact their own private returns. The literature on experimental games tends to focus more on analyzing individual deviations towards socially efficient outcomes than privately inefficient ones. Privately inefficient outcomes in CPR games have been seen as outliers of the experiment that have not been further analyzed [15]
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