Tragedy of the commons

Tragedy of the commons

How individuals prioritise personal gain over the well being of society

Eg. Private producers will keep fishing for profit

Common access resources

Natural resources over which no private ownership has been established

Eg. Seafoods, air

How can resource depletion worsen

However if producers stop because they are scared of resource depletion over time, the other producers will enter the market and take all resources leading to resource depletion

Tragedy of the common diagram (NE in production)

In the seafood market firms only care about their private costs due to self interest. This ,dams that MSC is greater than MPC and firms produce at a price p1q1 at the private optimum level. This causes an overproduction of the good from q* to q1 leading to a misallocation of resources and a deadweight welfare loss at the triangle abc which point to the social optimum level.