Threshold and Group Size Uncertainty in Common-Pool Resources

Abstract

Threshold common pool resource dilemmas, such as fisheries or groundwater reserves, are important topic for policy-makers. Uncertainty about the threshold for sustainable use or number of resource users may exacerbate the overconsumption problem. We are first to investigate the joint impact of threshold and group size uncertainty in this setting. Overall, we find that threshold uncertainty increases the likelihood of the resource being destroyed and reduces earnings from it. Group size uncertainty makes it more likely that the resource will survive and increases earnings. We find a heterogeneous interaction effect of threshold and group size uncertainty. This highlights the importance of joint analysis. The main policy implication is that a one size fits all approach to tackling uncertainty is not suitable.