The effect of environmental uncertainty on the tragedy of the commons

- Higher uncertainty may lead to higher or lower consumption in the CPR game.
- Consumption may be increasing or decreasing in both risk and ambiguity.
- The nature of resource deterioration influences the effects of uncertainty.
- High risk or ambiguity aversion lowers consumption in the CPR game.

We model a common pool resource game under environmental uncertainty, where individuals in a symmetric group face the dilemma of sharing a common resource. Each player chooses a consumption level and obtains a corresponding share of that resource, but if total consumption exceeds a sustainable level then the resource deteriorates and all players are worse-off. We consider the effect of uncertainty about the sustainable resource size on the outcome of this game. Assuming a general dynamic for resource deterioration, we study the effect of increased ambiguity (i.e., uncertain probabilities pertaining to the common resourceʼs sustainable size). We show that whereas increased risk may lead to more selfish behavior (i.e., to more consumption), increased ambiguity may have the opposite effect.