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Exploiting common resources with capital-intensive technologies: the role of external forces

Published online by Cambridge University Press:  01 October 2008

Chair of Environmental Policy and Economics, Institute for Environmental Decisions, ETH Zurich, Universitaetstrasse 22, 8092 Zurich, Switzerland. Email:
University of Maryland at College Park, USA


This paper focuses on the interactions between local communities having at least some degree of informal claims over natural resources and firms interested in commercially exploiting such resources, explicitly allowing for interventions by third parties interested in community welfare and environmental outcomes. Integrating conflict and bargaining theories, we develop a bargaining model with endogenous inside and outside options, in which the feasibility and outcomes of a potential bargaining game depend on the unraveling of a conflict stage and vice versa. The model implies that, contrary to the conventional bargaining model, distribution and efficiency cease to be separable. We show that certain third-party interventions in the bargaining process may have unexpected and counterproductive effects.

Research Article
Copyright © Cambridge University Press 2008

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