SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

Abstract: Many of the world's common pool resources are located in poor countries, where consumption levels may be low enough to adversely affect the users' health. Under these circumstances, an agent's utility function may be described as an S-shaped function of consumption. Using non-cooperative game theory, very poor groups of users are shown to have lower probability of cooperative management of common pool resources than groups with adequate consumption levels. However, users that are only moderately poor have the greatest chance for cooperation. For this group, if resource productivity varies, cooperation may break down in periods of low productivity. The theoretical results concur with empirical evidence of cooperation in common pool resources.

Keywords: Common pool resource; developing countries; dynamic game; irrigation; natural resource; non-linear utility

JEL-codes: C72; O13; Q15; Q25

25 pages, First version: January 25, 2001. Revised: February 16, 2001.

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