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How nature affects cooperation in common pool resource systems

Periodic Reporting for period 3 - NATCOOP (How nature affects cooperation in common pool resource systems)

Reporting period: 2019-08-01 to 2021-01-31

Global changes in the natural and social environment put natural resource systems under increasing pressure. This development is particularly acute for communally managed resources such as fisheries. On the one hand, economic incentives encourage overusing common-pool property while on the other hand, resource users directly rely on the services provided by the ecosystem. This reliance is particularly significant in the developing world as renewable resources are often vital for providing employment possibilities and a steady flow of income for subsistence level households. The exploitation of common-pool resources can therefore become a livelihood of last resort that smoothes the wealth distribution in a growing economy. However, in the developing countries, public goods are often poorly regulated due to weak legal institutions and insufficient enforcement of regulations. Solutions to this social dilemma are desperately sought-after but not obvious.

The NATCOOP project adopts a social-ecological perspective towards the sustainable development of natural resources. By bringing the dynamic two-way relationship between nature and cooperation in renewable resource systems into focus, the projects aims to study how nature shapes preferences and incentives of economic agents and how this in turn affects common-pool resource management. In recent advances of the economic literature, the effect of the natural environment on economic agents has been largely overlooked. NATCOOP aims to incorporate the “environment” of an agent into the analysis. Thereby, the project proposes a new perspective on common-pool resource management in order to improve the understanding of the relationship between nature and cooperation. This should facilitate solutions for the efficient allocation of scarce resources to pursue long-term social and economic development.

NATCOOP concentrates on three specific mechanisms. First, the projects explores how potential thresholds and tipping points in the natural resource systems lead to changes in cooperative behavior. Experiencing and learning about the dynamics of such an event might enable agents to coordinate on optimal outcomes. To this end, game-theoretical models of resource use with a threatening regime-shift are developed and validated by data analysis and experiments in the field. Second, the project aims to uncover whether the natural resource volatility influences risk preferences and how this in turn affects the resulting level of cooperation. Here, the relationship between risk exposure and risk aversion is analysed and their combined effect on resource governance will be formalized by appropriate models. Third, NATCOOP studies how social norms interact with the natural environment to facilitate cooperative solutions to the social dilemma of common-pool resource extraction. The project conducts research on the possibility to change social norms of cooperation by providing information on the behavior of peers while offering varying mechanisms for enforcement within the community.

The NATCOOP team visits fisheries in Tanzania, Chile, and Norway to study these objectives. The fisheries for dagaa and nile perch at Lake Victoria, the pelagic and benthic fisheries in Chile, and the Norwegian fisheries for cod and herring serve as case studies with differing natural and social environments. Through comparing these frameworks and drawing connections between all three objectives, NATCOOP utilizes organizational and conceptual synergies. As a unified project, the bigger picture of how the natural environment influences incentives for common-pool resource management can be addressed.
In relation to the overall objectives of NATCOOP (as outlined above), this is the work performed and main results achieved so far.

(A) How the existence and experience of a tipping point in a natural environment, or a catastrophic threshold, affect cooperative behavior among resource users:
We have developed and published a game-theoretical model that investigates how the existence and experience of a tipping point affects non-cooperative behavior. The main finding is that a catastrophic threshold might benefit resource users by facilitating coordination. Indeed, preservation with certainty may be the non-cooperative outcome. We are currently extending this model to account for the possibility of obtaining informative signals about the location of a tipping point through consumption of the resource (so-called “early warning signals”). Counterintuitively, this can make experimentation more risky.
We have designed and conducted an experiment that investigates whether the reaction of resource users differs when a regime shift has been caused by a natural event or is induced by humans. The data is collected, and is currently analyzed.
We have designed and conducted an experiment that investigates the link between increased resource scarcity (the potential result of crossing a threshold) and cooperation. The main finding is that scarcity leads to “tunneling”, i.e. that resource users neglect the long-term management of the resource for short-term needs. This effect is smaller for groups of resource users than individual resource users, indicating a benefit at the group-level of resource management. We are currently doing follow-up experiments to investigate mechanisms behind this result.

(B) Whether the natural resource volatility that resource users are exposed to influences risk preferences, and how this in turn affects cooperation:
We have begun the construction of a panel on risk preference and risk exposure among resource users. These resource users are fishers located in Chile and Tanzania. We are currently planning the third wave of this survey, which will enable us to analyze the relationship between risk preference and risk exposure, and how this relationship affects resource management. We have also designed and conducted a lab-in-the-field experiment in Chile that investigates this relationship. The main finding is a relationship between prudence and precautionary saving based on the fishers’ target species. There is, however, no direct relation between prudence and precautionary savings.

(C) How social norms interact with the natural environment to foster cooperation among resource users to overcome common-pool dilemmas:
We have designed and conducted a lab-in-the-field experiment in Tanzania that analyzes how providing information about the level of cooperation affects resource use as well as norms of cooperation. The main finding is that there is an effect on norms of cooperation when resource users have the possibility to sanction non-cooperators. Interestingly, the opportunity to sanction (though actual sanctioning is rare) creates resonance, which leads to a self-fulfilling prophecy where resource users conform with the initial belief about the level of cooperation.
We have designed and piloted an experiment that investigates whether exclusion from an unrelated task improves cooperation in a resource management setting. Furthermore, the aim is to investigate how this form of exclusion compares to other punishment institutions (e.g. fines).
In relation to the overall objectives of NATCOOP (as outlined above), we employ state of the art tools from game theory, experiments, and statistical analysis. However, we also go beyond the state of the art where necessary. Consider these two examples:
We ran a dynamic behavioral experiment in Tanzania over multiple rounds. This required dynamic calculations between each period, to enable participants to learn about the behavior of others. Since there was no electricity or network available in the field, we relied on a battery powered local network and a new generation of experimental software, to create a connected lab-in-the-field experiment.
The lab-in-the-field experiments in Chile that aimed to measure the relationship between risk preference and risk exposure among resource fishers required input about the variability of their target species. We then combined this experimental data with a statistical analysis of a large data set of Chilean harvesting events (spanning over several years with daily frequency).

In addition to the main results achieved so far (as outlined above), we expect NATCOOP to deliver the following during the second stage of the project period.
(A) How the existence and experience of a tipping point in a natural environment, or a catastrophic threshold, affect cooperative behavior among resource users:
We will complete the game-theoretical model of “early warning signals”, and fully describe the conditions in which experimentation becomes more risky.
We will analyze the experiment that investigates whether natural or human-induced causes drive regime shifts. Our prior hypothesis is that participants react more strongly to human-induced causes of regime shifts.
We will analyze the harvesting data from Chile empirically to uncover the relationship between resource scarcity and cooperation.

(B) Whether the natural resource volatility that resource users are exposed to influences their risk preferences, and how this in turn affects cooperation:
We will finalize the panel on risk preference and risk exposure among fishers located in Chile and Tanzania. We will also analyze the relationship between risk preference and risk exposure, and how this relationship affects resource management.
We will model the combined effect of risk preference and risk exposure on resource management. Theoretically, this is a link that is not well understood and we expect that our modeling effort will shed an important light on this question.

(C) How social norms interact with the natural environment to foster cooperation among resource users to overcome common-pool dilemmas:
We will analyze the experiment that investigates whether exclusion from an unrelated task improves cooperation in a resource management setting. We expect the main finding to be that exclusion from an unrelated, social, activity improves cooperation also in an experiment. The experimental design further allows us to disentangle to what extent the effect is driven by the foregone enjoyment of the social activity or by the signal of disapproval that the exclusion sends.