The power and limitations of proportional cutbacks in common-pool resources

This paper examines the success and limitations of proportional cutbacks as an allocation rule for improving the performance of common-pool resources (CPRs). Two field cases, one success and one failure, motivate the analysis. For symmetric CPRs, we establish the existence of efficiency-enhancing proportional cutbacks. We then introduce complications that arise in the presence of asymmetries, which induce a continuum of proportional cutbacks that raise efficiency above Nash equilibrium. Calibrating a linear-quadratic CPR model to global carbon dioxide emissions, the efficiency and distributional consequences of proportional cutbacks like those embodied in the Kyoto Protocol are derived. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification: Q38; D62.