Exogenous Regulatory Institutions for Sustainable Management of Common Pool Resources

This paper focuses on introducing and comparing various types of external regulatory institutions for management of common pool resources (CPRs), namely the quota-based management, resource status-based management, tax-based management, and bankruptcy management institutions. The performance of these regulatory institutions is demonstrated, using a numerical groundwater exploitation example. Results suggest that the benefits to different types of users as well as the sustainability of the CPR vary by the regulator’s choice of management institution. More specifically, quota-based management and CPR statusbased management institutions can lead to increased benefits to CPR beneficiaries, prolong the CPR’s life, and prevent “tragedy of the commons.” In contrast, tax-based management institutions may fail to provide increased benefits to users. Bankruptcy-based management institutions may also be used toward sustainable use of the CPRs; however, determining the optimal amount of cutbacks remains challenging under these management institutions.