Expectations, the commons, and optimal group size

Abstract

This article derives a formula for the optimal number of exploiters of a commons, whose output is sold in an imperfectly competitive market and whose exploiters hold nonzero or non-Nash conjectures. We express the optimal number of exploiters in terms of the conjecture, the elasticity of input productivity, and the price elasticity of market demand. Consistent conjectures-those that agree with reality-imply the full tragedy of the commons and zero profits for the exploiters. Show more