Tragedy of freedom of commons & Nash Equilibrium

1. THEORY OF ENVIRONMENTAL PLANNING & DESIGN
Topic:
Tragedy of the Commons & Nash Equilibrium
Submitted By:
P. Rajendra Prasad Naik
2170300066
M.E.P.M

2. TRAGEDY OF THE COMMONS
The tragedy of the commons is an economic theory of a situation within a shared-resource
system where individual users acting independently according to their own self-interest
behave contrary to the common good of all users by depleting or spoiling that resource
through their collective action.
The concept and name originate in an essay written in 1833 by the Victorian
economist William Forster Lloyd, who used a hypothetical example of the effects of
unregulated grazing on common land (then colloquially called "the commons") in the British
Isles. The concept became widely known over a century later due to an article written by the
ecologist Garrett Hardin in 1968.
Although commons have been known to collapse due to overuse (such as in over-
fishing), abundant examples exist where communities cooperate or regulate to exploit
common resources prudently without collapse.
• The "tragedy" Hardin describes is in fact not a tragedy of common property but rather a
tragedy of open access regimes.
• The problems identified by Hardin apply to expansive resources that are unregulated or
where regulation is difficult to enforce: oceans, atmosphere, expansive tracts of forest or
rangeland, water resources
• Essentially, he describes a Free Rider Problem.
Common Property Resources
According to Hardin, environmental problems are caused by overuse of common property
resources.
• All have equal rights to use these resources. because they are public goods:
• No ownership of common property such as meadows. seas. rivers, mountains.
• Non-exclusion, not possible to exclude others from using common property.
Expensive to stop others.
• Rival: one person's use reduces availability to others, e.g. grassland. fishing in a
lake. The resources are limited.
Criticism:
• Historically inaccurate - "it is difficult to find a passage of comparable length and fame that
contains so many errors as the one quoted" (Partha Dasgupta)
• "The "Tragedy of the Commons" is one of the modern world's most dangerous myths."
(George Monbiot)

3. • Overuse of the commons in traditional societies was generally prevented through a
sophisticated structure of norms practiced by the respective communities. There is no
evidence of systematic overgrazing.
• The "tragedy" Hardin describes is in fact not a tragedy of common property but rather a
tragedy of open access regimes.
Solution by Hardin:
1. Joint ownership is needed to control overuse.
2. Membership and fees should be paid to reduce usage,
3. Restrict number of users/members.
4. Payment for use, will increase individual costs, prevent overuse.
5. Fines and penalties for over-using the commons.
NASH EQUILIBRIUM
This concept is named after its inventor who is an American mathematician named John
Nash. He won 1994 Nobel Memorial Prize in Economic Sciences.
A concept of game theory where the optimal outcome of a game is one where no player has
an incentive to deviate from his or her chosen strategy after considering an opponent's choice.
OR “A Set of strategies or actions in which each firm does the best it can given its
competitors' actions.”
Cournot Equilibrium
Oligopoly model in which firms produce a homogeneous good, each firm treats the output of
its competitors as fixed, and all firms decide simultaneously how much to produce.
Since no firm has an incentive to change its output unilaterally as each firm is doing the best
it can given the decisions of its competitors. Thus a Cournot equilibrium is a Nash
equilibrium.
• Nash Equilibrium is a concept originally developed to model simple games.Effectively, it
says this: For any two groups that do not cooperate, there will be a point at which neither
group can benefit from unilateral action, and that the groups will hold their strategies constant
at this point.
• The Nash Equilibrium is not usually the most efficient strategy; it is only the best one
without cooperation.
• Through cooperation, it is likely that both parties will be able to increase their utility.