Determining the common property resource

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Suppose a lake is publicly owned, i.e. a common property resource, with free fishing for all. The number of fish caught varies with the number of people fishing as follows:

        Labour   Total Product

            1 13

            2 25

            3 36

            4 46

            5 55

            6 63

            7 70

            8 76

            9 81

Assume the market price of these fish is $10 per fish, and this price is not affected by the number of fish caught in this lake. Assume that all fishermen can earn $100 per day in their next best alternative. Assume the fishermen share equally in the proceeds of the lake.

a) Explain much fishing will occur in a common property setting.

b) Assume now that the lake is privately owned and the owner hires fishermen for $100 per day. How much fishing would the owner allow?

c) Why is the common property result considered to be inefficient?

Reference no: EM132098813

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