Potential Games and the Tragedy of the Commons

The term tragedy of the commons is widely used to describe the overexploitation of open access common pool resources. Open access allows potential resource users to continue to enter the resource up to the point where rents are exhausted. The resulting level of resource use is higher than the socially optimal level. In extreme cases, unlimited entry can lead to the collapse of the resource and the communities that depend on it. In this paper we use potential games to analyze the relation between costs of entry, costs of production, and the equilibrium number of resource users in open access regimes. We find that costs of access and costs of production determine the equilibrium number of resource users. We also find a natural link between Cournot competition and the tragedy of the commons. We discuss the relation between common pool resource management regimes and cost structure and show that cost structures are sufficient to determine the number of resource users accessing the resource.