When is increasing consumption of common property optimal? Sorting,congestion and entry in the commons |
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Institution: | 1. Centre for Environmental Economics and Policy in Africa, University of Pretoria, South Africa;2. Prime Africa, South Africa |
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Abstract: | First-best pricing or assignment of property rights for rival and non-excludable goods is often infeasible. In a setting where the social planner cannot limit total use, we show that common-property resources can be over or under-consumed. This depends on whether the external benefits of reallocating users to less congested resources outweigh the additional costs imposed by new entrants. Importantly, we show that it may be optimal to encourage consumption of some common property resources. Our results have important implications for settings ranging from fisheries and forestry to recreational demand and transportation. |
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Keywords: | Common property resources Congestion externalities Tragedy of the commons |
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