Voluntary and mandatory provision of common-pool resources with heterogeneous users

Abstract

Abstract Common-pool resource (CPR) users often face two types of problems to solve: provision and appropriation. Provision problems are often solved through the voluntary or mandatory contribution of users. This paper uses a laboratory experiment to explore how the provision scheme shapes extraction choices by CPR users who are heterogeneous in wealth. Users’ choices are compared under three conditions. In the progressive- and regressive-tax conditions, users’ contribution to the provision of CPR is determined exogenously, and in the third condition, users endogenously choose their contribution level. The standard model of own-payoff-maximization and the behavioral models of inequality aversion and equity theory predict different patterns of choices for rich and poor users under each condition. Experimental results are consistent with the predictions of the inequality-aversion model and clearly refute the predictions of equity theory. Importantly, inequality aversion appears to be motivating choices differently in the exogenous- and endogenous-provision conditions: under the regressive- and progressive-tax conditions, extraction choices are consistent with inequality aversion motives, whereas in the endogenous treatment, contribution decisions are consistent with inequality aversion but extraction choices are not.