Tragedy of the Commons

Shared resources, individual incentives, collective ruin, and the property-rights fix.

Equilibrium: B* = 80.0, V* = 24.0

Current equations

Average catch: V = 80 − 0.7·BMarginal catch: V = 80 − 1.4·BCost per boat: V = 24

A lake nobody owns. Each new boat looks at the average catch and enters if it beats the cost of fishing. But every entrant drags down everyone else's catch, and nobody counts that harm. Entry keeps going until the average catch barely covers costs, far beyond what is best for the group.

Shift the curves

Health of the fish stock0

A richer stock raises the catch every boat brings home.

Cost of running a boat (fuel, licence fees)0

A licence fee is the classic fix: raising the private cost until entry stops at the social optimum.

The Tragedy of the Commons model, in writing

Definition

Overuse of a rival but non-excludable resource: each user captures the full benefit of extra use while the depletion cost spreads across everyone.

Private use where MB = MC(private); overuse because MC(social) > MC(private)

The intuition

One more boat on the fishery earns its owner a full catch but shrinks everyone's future stock a little. Multiply by every boat owner reasoning identically and the fishery collapses, rational individuals, ruinous total.

Exam tip

Distinguish from public goods: commons ARE rival (fish run out); the fixes are property rights, quotas, or Pigouvian pricing.

Related models in Micro Foundations

Production Possibility Frontier →Absolute vs. Comparative Advantage →Supply & Demand →Price Elasticity of Demand & Supply →