Munich Personal RePEc Archive

Tragedy of the common canal

Holt, Charles A. and Johnson, Cathleen and Mallow, Courtney and Sullivan, Sean P. (2010): Tragedy of the common canal.

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Abstract

This paper uses laboratory experiments to investigate the effects of alternative solutions to a common-pool resource with a unidirectional flow. The focus is on the comparative economic efficiency of communications, bilateral “Coasian” bargaining, auctions and price-based allocations. All treatments improve allocative efficiency relative to a baseline environment. Communication and bilateral bargaining are not generally as effective as market allocations. An exogenously imposed, optimal fee results in the greatest efficiency gain, followed by auction allocations that determine the usage fee endogenously.

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