Institutions Matter! Why the Herder Problem is Not a Prisoner's Dilemma

Abstract:     
In the game theory literature, Garrett Hardin's famous allegory of the tragedy of the commons has been modeled as a variant of the Prisoner's Dilemma, labeled the Herder Problem (or, sometimes, the Commons Dilemma). This brief paper argues that important differences in the institutional structures of the archetypal Prisoner's Dilemma and Herder Problem render the two games different in kind. Specifically, institutional impediments to communication and cooperation that ensure a dominant strategy of defection in the classic Prisoner's Dilemma are absent in the Herder Problem. Their absence does not ensure that players will achieve a welfare-enhancing, cooperative solution to the Herders Problem, but does create far more opportunity for players to alter the expected payoffs through cooperative arrangements. In a properly modeled Herder Problem, defection would not always be the dominant strategy. Consequently, the Herder Problem is not in the nature of a Prisoner's Dilemma.

Number of Pages in PDF File: 20

Keywords: tragedy of the commons, prisoner's dilemma, game theory, herder problem, institutions, cooperation, communication, commons

JEL Classification: C7, D74, H41, K11, K12, K32, K42, Q15, Q22

working papers series