Center for International and Development Economics Research

To analyze the effect of asset inequality on cooperation within a group, we consider a two-player noncooperative model of conservation of a common-pool resource (CPR): a fishery. We give necessary and sufficient conditions such that conservation is a Nash equilibrium, and we show that increasing inequality does not, in general, favor full conservation. However, once inequality is sufficiently great, further inequality may push the players closer to efficiency. Thus the relationship between inequality and economic efficiency is U-shaped. We analyze the implications for conservation if players have earning opportunities outside the commons. Finally, we consider various schemes of community regulation of the commons in the light of the noncooperative model with or without exit options. We find that increases in inequality may restrict the range of implementable mechanisms.