Dynamic Resource Development: How Parties Exploit vs. Invest into Common Resources

Keywords: common resources, allocation negotiation, future consequences, experimental study

Abstract: Common resources, such as water, constitute a cause of conflicts worldwide. Negotiations on resource ownership (exclusive vs. shared) are the indispensable decision-making processes that prevent escalation and enable prosperity. Two types of allocation negotiations taking into account consequences of immediate allocation decisions are introduced. In exploitation negotiations, parties negotiate on the allocation of immediate gains and emerging future losses (e.g. exploitation of a shared river and consequential revivification costs). In investment negotiations, parties negotiate on the allocation of immediate losses and emerging future gains (e.g. investments into a water saving system and consequentially improved water deposits). Although both negotiations are equal in sum from a mathematical viewpoint, prior research indicates that psychological processes are not, leading presumably to better outcomes in exploitation negotiations. By testing this prediction, the present research will enable an understanding of opportunities and challenges in finding efficient agreements in negotiations on dynamically developing common resources.