Underwater Coase: Can Diving Save the Coral Reefs?

Abstract

The absence of well-defined property rights in an ocean setting can lead to the over-exploitation of its resources. This paper examines one case, the Gili Islands, in Indonesia, where the weak enforcement of legally defined State rights led to the formalisation of local rules that protect coral reefs through a process of bargaining between dive schools and fishermen, who each utilise the surrounding coral reefs for their livelihoods. This article discusses whether it is possible, under these institutional arrangements, to increase the area of coral reef protection and whether these institutional arrangements can be introduced where similar threats to coral reefs exist.

Keywords: property rights, coral reefs, contingent valuation, willingness to pay, Gili Islands, institutions, Coase theorem.

JEL Classification: Q32, Q34