Triggering Cooperation

Abstract:

Cooperation of users is fundamental to the management of common pool resources. Russell Hardin took the pessimistic view that we are headed for a tragedy of the commons, but Elinor Ostrom pointed to many examples of successful cooperative local institutions. Her work inspired large scale forest devolution reforms in many developing countries. Unfortunately, success has been limited. There seems to be a gap in knowledge on how cooperation is triggered, especially after rapid change on management rights. We bring a new proposal to the table, which in theory triggers cooperation at low cost. The idea is to provide prospective forest owners with outside-options, so that participation becomes voluntary. Combine the insight that social preferences transform social dilemmas into coordination problems with the logic of forward induction; the prediction is that the outside options will be rejected and that the foresters will help each other in the woods. The outside options may be costly to provide if chosen, but in theory those burdens are counterfactual and no cost is thus incurred. We test the empirical relevance of our proposal in a lab-in-the-field experiment in the Ethiopian highlands.