This program sets up a multi-person game in which people are
given sequential locations along an irrigation canal. Each person
has a number of fields with differing productivities. Irrigation
increases the intrinsic productivity of each field, but there is not
enough water for downstream users if upstream users irrigate all
of their fields.
Options for controling over-use include group discussions,
Coasian bargaining, or auctions for irrigation
permits. Students are typically surprised by
the discovery that a tax (which users may oppose) can be
beneficial to the group as a whole when the fee revenues are returned.
Class discussion can focus on efficiency, i.e. the actual value of
the harvest as a percentage of the maximum that could be achieved
if water were allocated to fields with the highest productivities.
See "Tragedy of
the Common Canal," (C. Holt, K. Johnson, C. Mallow, and S. Sullivan)
Southern Economics Journal, 2012: 1142-1162.
Copyright 2009, Charles Holt, Please report problems and suggestions:
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The gray line in the graph shows efficiency predictions for the case in which water is taken by upstream users whenever it is available. Irrigation decisions in the first three rounds resulted produced this "selfish" outcome, as indicated by the three blue dots. In contrast, permits were auctioned off in the second treatment, and this market solution raised efficiencies sharply.|
Vecon Lab - September 19, 2020