Abstract:
A conceptual model and numerical example are used to show that private
property regimes are not necessarily preferable to common property regimes
on efficiency grounds when: (1) agents are risk averse; (2) exogenous enforcement
of risk sharing schemes is not feasible; and (3) the associated common
property regime is characterized by economies of scope in the production of
information. The paper considers a case of idiosyncratic risk in a dynamic
grazing context where the marginality of the resource is such that insurance
markets are thin or non-existent. The policy implication is that the
establishment and maintenance of a common property regime is shown to
be a (possibly) reasonable institutional response in the face of difficult and
particular circumstances.
