Dilemmas, coordination and defection: How uncertain tipping points induce common pool resource destruction

Abstract

Many common pool resources (CPRs) have tipping points—stock levels below which the resource is permanently damaged or destroyed—but the specific levels at which these thresholds are crossed are rarely known with certainty. We model a CPR in which uncertainty simultaneously creates a Prisoner's Dilemma and a Coordination Game. This model highlights a novel mechanism through which uncertainty incentivizes the overuse of a CPR. In the model, two Nash Equilibria exist, both of which lead to a Tragedy of the Commons, but one is an inferior solution because it leads to assured resource destruction. We use a single-period laboratory experiment to investigate the effects of uncertain tipping points on constituents' resource extraction decisions. Experimental results suggest that uncertainty reduces coordination in this type of CPR setting and increases the likelihood of resource destruction. We also find that tax and fine policies reduce consumption rates and prevent resource destruction.