Limited-Tenure Concessions for Collective Goods

Abstract

This paper proposes and analyzes the consequences of a widely-used, but little-studied institution, limited-tenure concessions, for governing club goods and common-pool resources. We first show in a simple repeated game setting that such a system can incentivize socially-efficient provision of club goods. We then extend the model to account for spatially-connected resources, an arbitrary number of heterogeneous agents, and natural resource dynamics, and show that the basic ability of limited-tenure concessions to incentivize the first best private provision is preserved in this rich setting that is more representative of natural resources such as fish, water, and game. The duration of tenure and the dispersal of the resource then play pivotal roles in whether this limited-duration concession achieves the socially optimal outcome. Finally, in a setting with costly monitoring, we discuss the features of a concession contract that ensure first-best behavior, but at least cost to the implementing agency.