Managing Local Commons: Theoretical Issues in Incentive Design

Local commons encompass a wide range of resources whose shared feature is the need for some form of collective management. In what follows, we shall be concerned mainly with the problems of implementing a collective management plan. Whatever the mechanisms invoked, many recent contributions to the literature have stressed that relatively informal collective management of common property resources can in the right circumstances avoid the severe resource degradation predicted by “the tragedy of the commons.” Nevertheless, both empirical and theoretical arguments suggest that cooperative behavior may be only partial, and the incentives of short-term self-interest only partially held in check. Under what circumstances, then, can more formal implementation mechanisms make good the deficiency? And, given that formal incentives are typically stronger than informal ones, are there any reasons why informal incentives might nevertheless sometimes be preferred?