Acceptable regulation of a common resource: an experimental analysis.

Summary We test in the laboratory three instruments designed to regulate the exploitation of a common resource by heterogeneous agents: a system of taxes and subsidies, individual transferable and non-transferable quotas. We propose a model in which the objective assigned to these instruments is to reduce the exploitation of the resource compared to an open access regime, without reducing the profit of the users. While each of the instruments achieves the reduction objective on average, the instruments do not have the same effects on the levels and distribution of profits. The system of taxes and subsidies selects the most efficient users, but increases the inequality of individual profits. On the other hand, neither instrument improves profits in the strict Pareto sense, although by this criterion the two market instruments perform better than non-transferable quotas.