Question

6. Common resources and the tragedy of the commons

Larry, Raphael, and Alex are fishermen who live next to a lake that is open to fishing; in other words, anyone is free to use the lake for fishing. Assume that these men are the only three fishermen who fish in this lake and that the lake is large enough for all three fishermen to fish intensively at the same time.

Each year, the fishermen choose independently how many fish to catch; specifically, they choose whether to fish intensively (that is, to place several fishing lines in the water for long periods of time, which hurts the sustainability of the lake if enough people do it) or to fish nonintensively (which does not hurt the sustainability of the lake). None of them has the ability to control how much the others fish, and each fisherman cares only about his own profitability and not about the state of the lake.

Assume that as long as no more than one fisherman fishes intensively, there are enough fish to restock the lake. However, if two or more fish intensively, the lake will become useless in the future. Of course, fishing intensively earns a fisherman more money and greater profit because he can sell more fish.

The lake is an example of   because the fish in the lake are   and   .

Depending on whether Raphael and Alex both choose to fish either nonintensively or intensively, fill in Larry's profit-maximizing response in the following table, given Raphael and Alex's actions.

	Raphael and Alex's Actions
	Fish Nonintensively	Fish Intensively
Larry's Profit-Maximizing Response

Which of the following solutions could ensure that the lake is sustainable in the long run, assuming that the regulation is enforceable? Check all that apply.

Outlaw intensive fishing.

Develop a program that entices more fishermen to move to the area.

Convert the lake to private property, and allow the owner to sell fishing rights.

Answer 1

In the given case, anyone can fish in the lake. However, fishing by one person can reduce the quantity available to others.

So, fish in lake is non-excludable but rival in consumption.

These are the characteristics of the common resource.

So,

The lake is an example of common resource because the fish in the lake are non-excludable and rival in consumption.

It has been provided that no fisherman can prevent others from fishing intensively. Moreover, intense fishing leads to greater profit. this means every fisherman wouold fish intensively otherwise he would be at loss.

So,

If Raphael and Alex fish non-intensively, Larry's profit maximizing response is to fish intensively.

If Raphael and Alex fish intensively, Larry's profit maximizing response is to fish intensively.

Following are the required solutions -

1. Outlaw intensive fishing.

2. Convert lake into private property, and allow the owner to sell fishing rights.