The Tragedy of the Commons in a Fishery when Relative Performance Matters

Abstract

This paper presents a simple model of a common access fishery where fishermen care about relative performance as well as absolute profits. Our specification captures the idea that status (which depends on relative performance) in a community infuences a person's well-being. We consider two alternative specifications of relative performance. In our first specication, relative performance is equated to relative after-tax profits. In our second specification, it is relative harvests that matter. We show that overharvesting resulting from the tragedy of the commons problem is exacerbated by the desire for higher relative performance, leading to a smaller steady-state fish stock and smaller steady-state profit for all the fishermen. We examine a tax package, consisting of a tax on relative profit and a tax on effort, and an individual quota as alternatives to implement the socially effcient equilibrium.relative income, relative performance, status, fishery, tragedy of the commons