Solving conflict over common pool resources through delegation to a stakeholder

Abstract

We study the effectiveness of delegation as a conflict resolution mechanism for managing common pool resources (CPR). Delegation involves empowering stakeholders to make collective decisions on behalf of resource users. We investigate, theoretically and experimentally, a delegation approval mechanism (DAM) in a three-player common-pool resource (CPR) game in which players can vote for extractions. In case of disapproval, in stage 2, one player is randomly selected to choose authoritatively the uniform extraction for the group, putting the disapproval arbitration at an endogenous level. Backwards elimination of weakly dominated strategies ($BEWDS$) predicts the socially optimum extraction under unanimity, but not under majority. Our experimental findings show that the DAM strongly reduces extractions and that most selected delegates choose the optimal extraction.