Reference no: EM133132687

There are two places to fish - the ocean and the lake. Xavier enjoys fishing in the ocean during the day and when Xavier fishes in the ocean he always catches 400 fish per month irrespective of the number of other fishers. Yvonne likes to fish during the day and when he fishes in the ocean he catches 500 fish irrespective of the number of other fisherman. If Xavier is the only fisher in the lake he catches 450 fish per month. If Yvonne is the only fisher in the lake, he catches 600 fish per month. If both Xavier and Yvonne fish in the lake they catch 425 fish per month each. At the beginning of each month, both Xavier and Yvonne choose a place to fish for the entire month.

(a) Assume that Xavier fishes at night and Yvonne during the day so neither knows about the other, thereby preventing negotiation. What is the equilibrium outcome? Is this efficient? For this question draw up a payoff matrix and identify the best responses of Xavier and Yvonne.

(b) Assume Xavier gets full ownership of the lake, that he is able to exclude others costlessly but is unable to negotiate with other fishers. What is the equilibrium in this case? Is this efficient?

(c) Assume Xavier gets full ownership of the lake, that he is able to exclude others costlessly and can costlessly bargain over who fishes where and how the fish are caught. What is the equilibrium under bargaining? Is this efficient?

(d) What is meant by a common property resource and why do they tend to be overused?