Inequality and Conservation on the Local Commons: A Theoretical Exercise

To analyse the effect of asset inequality on co‐operation within a group, we consider a two‐player nonco‐operative model of conservation of a common‐pool resource. Overexploitation by one user affects another's payoff by reducing the next‐period catch. We give necessary and sufficient conditions such that conservation is a Nash equilibrium, and show that increasing inequality does not, in general, favour full conservation. However, once inequality is sufficiently great, further inequality can raise efficiency. Thus, the relationship between inequality and economic efficiency is U‐shaped. Finally, we analyse the implications for conservation if players have earning opportunities outside the commons.