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The Tragedy of the Commons As a Prisoner's Dilemma. Its Relevance

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The Tragedy of the Commons As a Prisoner's Dilemma. Its Relevance sustainability Technical Note The Tragedy of the Commons as a Prisoner’s Dilemma. Its Relevance for Sustainability Games Alessio Carrozzo Magli 1,*, Pompeo Della Posta 2 and Piero Manfredi 2 1 Department of Economics, University of Bologna, Piazza Scaravilli 2, 40126 Bologna, Italy 2 Department of Economics and Management, University of Pisa, Via Ridolfi 10, 56124 Pisa, Italy; [email protected] (P.D.P.); [email protected] (P.M.) * Correspondence: [email protected] Abstract: In the current battle for sustainability and climate, understanding the nature of sustainabil- ity games is of paramount importance, especially to inform appropriate policy actions to contrast the harmful effects of global climate change. Relatedly, there is no consensus in the literature on the proper game-theoretic representation of the so-called Tragedy of the Commons. A number of contributions have questioned the prisoner’s dilemma as an appropriate framework. In this work, we provide a representation that reconciles these two positions, confirming the ultimate nature of the Tragedy as a prisoner’s dilemma, rather than a coordination issue, and discuss the ensuing implications for sustainability policy interventions. Keywords: sustainability game; prisoner’s dilemma; coordination game; Tragedy of the Commons; green investment; Nash equilibrium Citation: Carrozzo Magli, A.; Della Posta, P.; Manfredi, P. The Tragedy of 1. Introduction the Commons as a Prisoner’s The planetary challenge of global climate change and the planned contrasting actions Dilemma. Its Relevance for such as, e.g., in the case of Europe, the European Green Deal [1], as well as the momentum Sustainability Games. Sustainability to the ecological transition that should be promoted by the post-pandemic recovery plans, 2021, 13, 8125. https://doi.org/ will require an unprecedented supporting effort by science, at any level. In relation to this, 10.3390/su13158125 a fundamental step on the theoretical side would be to achieve a full understanding of the nature of what is termed here as a “sustainability game”. By “sustainability game”, we Academic Editor: Luigi Aldieri mean any form of game, that is, any strategic interactions—involving any type of economic, social and political agents (from consumers and producers, to intermediate societal bodies Received: 8 June 2021 up to institutions and governments)—specifically dealing with the environment latu sensu Accepted: 12 July 2021 Published: 21 July 2021 whose outcome could have a relevant impact on the Earth’s fundamental resources that will be available to current and future generations. With special reference to climate Publisher’s Note: MDPI stays neutral change, Heitzig et al. [2] spoke instead of a “mitigation game”. This definition obviously with regard to jurisdictional claims in includes the current battle against global climate change as its ultimate and pervasive published maps and institutional affil- endpoint. A number of contributions have identified the prisoner’s dilemma as the most iations. suited game-theoretic representation of sustainability games (e.g. Ostrom [3], Cooper and Barrett [4], Heugues [5], Dutta and Radner [6], Heitzig et al. [2]) other works have focused on coalition formation as a strategy to cope with the resulting free-riding problem (Hannam et al. [7], Nordhaus [8], Finus [9], Carraro and Siniscalco [10] and Wood [11] and a few have underlined the role of politics and institutions in strategic interactions (North [12]). Surely, Copyright: © 2021 by the authors. Licensee MDPI, Basel, Switzerland. an indisputable merit of the prisoner’s dilemma is that of lucidly highlighting the tension This article is an open access article between individual selfish behavior and collective interest, where everyone, pursuing the distributed under the terms and former, achieves an overall lower welfare than cooperation would instead ensure. The conditions of the Creative Commons prisoner’s dilemma tends to arise conceptually in whatever type of strategic interactions. Attribution (CC BY) license (https:// For example, consider two producers that have to choose between a clean (“sustainable”) creativecommons.org/licenses/by/ and a dirty process. The latter (the former) is cheaper (more expensive) but has an (no) 4.0/). impact on the environment. From an individual standpoint, it is convenient to adopt Sustainability 2021, 13, 8125. https://doi.org/10.3390/su13158125 https://www.mdpi.com/journal/sustainability Sustainability 2021, 13, 8125 2 of 10 the dirty process to minimize costs (thereby maximizing profits) in spite of forcing the community to share an environmental cost (i.e., a negative externality). Since this is true for both (all) players, all players will play “dirty”. However, the doubled environmental damage at the community level will compensate the individual increase in profits, such that eventually, had both adopted the clean process, individual welfare would be higher for all players, as well as for the community as a whole that preserved its environment. It is easy to realize that such considerations apply, mutatis mutandis, to any other instance of strategic interactions between economic or political agents (consumers, governments, intermediate bodies, etc.) facing issues of profit maximization (or cost minimization) in an interactive setting. Notably, all the previous ones are instances of the so-called free rider problem (Stiglitz [13]) that arises when considering public and common goods. In general, however, the consensus on this is far from being unanimous as, for exam- ple, recent works have rather pinpointed the coordination nature of climate negotiations (DeCanio and Freimstand [14], Barrett [15,16]) as well as of more general economic games dealing with the environment (Mielke and Steudle [17]). A much-related concept, stemming directly from the (un)sustainability of natural resource exploitation beyond the Earth’s natural regenerative ability and carrying capacity, is the classic problem of the Tragedy of the Commons, first introduced by Lloyd [18] and later popularized by Hardin [19]. By their very definition, common goods, such as free natural resources, satisfy the well-known properties of non-excludability and rivalry. However, those who have access to them cannot resist the temptation to over-exploit them at the expense of other people and the community as a whole. In his seminal work, Hardin made the example of a wide pasture feeding the cows belonging to a large community. Under these circumstances, each agent has a private incentive to add a cow to increase individual profit because he perceives that this additional cow will have a small (negative) impact on the amount of pasture available to the community as a whole, what we will term, just for organizing the discussion, the first Hardin postulate. Therefore, each agent will add cows and the process will unavoidably continue until the common will be completely exhausted, what we will term later on as the second Hardin postulate. As with the prisoner’s dilemma, the Tragedy of the Commons also effectively demon- strates the tension between individual selfish behavior and the collective interest. The relationship between the Tragedy of the Commons and the prisoner’s dilemma has attracted the attention of scholars from different disciplines. Some early works (Dawes [20] and references therein, Olson [21] and Ostrom [3]) simply postulated that the Tragedy of the Commons is a prisoner’s dilemma with a large number of players. Based on a number of celebrated field experiments, Rapoport [22] concluded that cooperation in a four-player Tragedy of the Commons is far more difficult to achieve than in a two-player prisoner’s dilemma. This finding is not at odds with the interpretation of the Tragedy as a prisoner’s dilemma, given that the increase in the number of players extends the relevance of the prisoner’s dilemma and worsens its impact (Ostrom [3]). An intuitive explanation of this circumstance lies in two main arguments: (i) the fact that the larger the number of agents, the larger the communication issues will be, thereby making coordination harder and harder, and (ii) the fact that the larger the number of agents, the lower both the perceived and the actual environmental impact of each single player will be. In relation to point (ii), think, for instance, of an oligopoly of dirty producers in a fixed size economy. In this case, the higher the number of firms, the lower individual production and therefore the lower the individual impact on the environment, in spite of an increasing aggregate production. However, the tension between the prisoner’s dilemma and coordination reappears here as well. For example, Barrett [16], and Decanio and Fremstad [14] implicitly recalled the Tragedy of the Commons, when they argued that the prisoner’s dilemma, typical of climate negotiations and sustainability games, could evolve into a coordination game when players have perfect and symmetric information about the threshold of environmental damage that triggers a climate catastrophe. From a quite different perspective, Romagny et al. [23] claimed that the two-player Tragedy of the Commons loses its nature of a pris- Sustainability 2021, 13, 8125 3 of 10 oner’s dilemma when the set of strategies is continuous rather than binary. Through a more articulated discussion in this journal, Diekert [24] suggested a number of factors undermining the prisoner’s dilemma’s interpretation of the Tragedy. First, he pinpointed that when the number of players
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