Tragedy of freedom of commons & Nash Equilibrium
1 like711 views
The document discusses the Tragedy of the Commons theory and Nash Equilibrium concept. The Tragedy of the Commons theory proposes that individuals acting in their own self-interest will deplete shared limited resources. Hardin argued this leads to environmental problems for common resources like forests and oceans that are open access. Critics note this ignores how communities historically regulated common resources to avoid overuse. The document also explains Nash Equilibrium in game theory as a set of strategies where no player can benefit from changing their strategy given an opponent's choices.
Tragedy of freedom of commons & Nash Equilibrium
- 1. THEORY OF ENVIRONMENTAL PLANNING & DESIGN Topic: Tragedy of the Commons & Nash Equilibrium Submitted By: P. Rajendra Prasad Naik 2170300066 M.E.P.M
- 2. TRAGEDY OF THE COMMONS The tragedy of the commons is an economic theory of a situation within a shared-resource system where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting or spoiling that resource through their collective action. The concept and name originate in an essay written in 1833 by the Victorian economist William Forster Lloyd, who used a hypothetical example of the effects of unregulated grazing on common land (then colloquially called "the commons") in the British Isles. The concept became widely known over a century later due to an article written by the ecologist Garrett Hardin in 1968. Although commons have been known to collapse due to overuse (such as in over- fishing), abundant examples exist where communities cooperate or regulate to exploit common resources prudently without collapse. • The "tragedy" Hardin describes is in fact not a tragedy of common property but rather a tragedy of open access regimes. • The problems identified by Hardin apply to expansive resources that are unregulated or where regulation is difficult to enforce: oceans, atmosphere, expansive tracts of forest or rangeland, water resources • Essentially, he describes a Free Rider Problem. Common Property Resources According to Hardin, environmental problems are caused by overuse of common property resources. • All have equal rights to use these resources. because they are public goods: • No ownership of common property such as meadows. seas. rivers, mountains. • Non-exclusion, not possible to exclude others from using common property. Expensive to stop others. • Rival: one person's use reduces availability to others, e.g. grassland. fishing in a lake. The resources are limited. Criticism: • Historically inaccurate - "it is difficult to find a passage of comparable length and fame that contains so many errors as the one quoted" (Partha Dasgupta) • "The "Tragedy of the Commons" is one of the modern world's most dangerous myths." (George Monbiot)
- 3. • Overuse of the commons in traditional societies was generally prevented through a sophisticated structure of norms practiced by the respective communities. There is no evidence of systematic overgrazing. • The "tragedy" Hardin describes is in fact not a tragedy of common property but rather a tragedy of open access regimes. Solution by Hardin: 1. Joint ownership is needed to control overuse. 2. Membership and fees should be paid to reduce usage, 3. Restrict number of users/members. 4. Payment for use, will increase individual costs, prevent overuse. 5. Fines and penalties for over-using the commons. NASH EQUILIBRIUM This concept is named after its inventor who is an American mathematician named John Nash. He won 1994 Nobel Memorial Prize in Economic Sciences. A concept of game theory where the optimal outcome of a game is one where no player has an incentive to deviate from his or her chosen strategy after considering an opponent's choice. OR “A Set of strategies or actions in which each firm does the best it can given its competitors' actions.” Cournot Equilibrium Oligopoly model in which firms produce a homogeneous good, each firm treats the output of its competitors as fixed, and all firms decide simultaneously how much to produce. Since no firm has an incentive to change its output unilaterally as each firm is doing the best it can given the decisions of its competitors. Thus a Cournot equilibrium is a Nash equilibrium. • Nash Equilibrium is a concept originally developed to model simple games.Effectively, it says this: For any two groups that do not cooperate, there will be a point at which neither group can benefit from unilateral action, and that the groups will hold their strategies constant at this point. • The Nash Equilibrium is not usually the most efficient strategy; it is only the best one without cooperation. • Through cooperation, it is likely that both parties will be able to increase their utility.