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The Tradeoff of the Commons

Publication Date
  • D23 - Organizational Behavior
  • Transaction Costs
  • Property Rights
  • K23 - Regulated Industries And Administrative Law
  • D45 - Rationing
  • Licensing


We develop a model of scarce, renewable resources to study the commons problem. We show that, contrary to conventional wisdom, property rights can often be less efficient than a commons. In particular, we study two effects: (1) waste which arises when individuals expend resources to use a resource unavailable due to congestion and (2) the risk of underutilization of the resource. We provide necessary and sufficient conditions for each effect to dominate the other when the cost of determining the availability of a resource is low.

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