External Control May Destroy the Commons

In commons situations, what one user takes affect the other users' opportunities. Game-theoretical analysis predicts an overuse of the resource for a large and relevant class of these situations. Past empirical research however appears to show that individuals in a commons situation often establish institutions more or less adequate to handling the problem. This paper reports on an experimental investigation of how (costly and partial) monitoring and sanctioning of offenders affects the incentive structure and the behavior of commoners. The central finding is that even though controls and sanctions shift the Nash-equilibrium to a more favourable outcome, subjects tend not to reach the level of welfare of this equilibrium in practice. This suggests that the potential increase of efficiency by means of monitoring and inspection has to be judged very carefully; policy recommendations based on the assumption that adequate inspection and sanctions will force people to behave better are highly questionable.