Production, information and property regimes : efficiency implications in the case of economies of scope

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.