We model a dynamic common property resource game with unobservable actions and non-linear stock-dependent costs. We propose a strategy profile that generates a worst perfect equilibrium in the punishment phase, thereby supporting cooperation under the widest set of conditions. We show under what set of parameter values for the discount rate, resource growth rate, harvest price, and the number of resource users, this strategy supports cooperation in the commons as a subgame perfect equilibrium. The strategy profile that we propose, which involves harsh punishment after a defection followed by forgiveness, is consistent with human behavior observed in experiments and common property resource case studies.
Keywords: Common property resources, Cooperation, Dynamic games, Renewable resources, Subgame perfection, Unobservable actions, Worst perfect equilibrium
Tarui, N., C.F. Mason, S.Polasky, Greg Ellis. 2008. Cooperation in the commons with unobservable actions. Journal of Environmental Economics and Management 55: 37–51.REQUEST FROM AUTHOR