Simulating Institutional Change for Governing Natural Common-Pool Resources: An Agent-Based Model Approach

Abstract Many local communities rely on natural Common-Pool Resources (CPRs) for their economic well-being. However, these resources often suffer from overexploitation due to the tragedy of the commons. Despite this challenge, evidence shows that local inhabitants can effectively govern CPRs through institutional rules. However, the specific mechanisms driving the emergence and changes in CPR governance still require further exploration. Agent-Based Models (ABMs) offer valuable insights into these dynamics by bridging the micro and macro levels of analysis. In this study, researchers employed the grammar of institutions (ADICO) to systematically model the mechanisms of emergence, institutional changes, and user strategies in CPR governance. The results demonstrate that self-governing institutions, which enforce rules by detecting cheaters and excluding them from resource extraction, outperform open-access arrangements. Furthermore, the study reveals that more complex institutional changes lead to weaker governance performance, while stricter rule enforcement results in higher resource stock levels but lower user payoffs. Lastly, the study suggests that reducing costs imposed on users is vital to prevent resource overexploitation. These findings enhance our understanding of the mechanisms behind successful CPR governance and can inform policy decisions aimed at promoting sustainable resource utilization. JEL classification: Q57, Q50, C63