0025-1909/98/4409/1234$05.00 Copyright  1998, Institute for Operations Research and the Management Sciences 1234 MANAGEMENT SCIENCE/Vol. 44, No. 9, September 1998 3b2d se13 Mp 1234 Sunday Sep 13 02:25 PM Man Sci (September) se13 Not Only the Tragedy of the Commons: Misperceptions of Bioeconomics Erling Moxnes Foundation for Research in Economics and Business Administration, SNF, Breiviken 2, N-5035 Bergen-Sandviken, Norway A n exploratory search for explanations of mismanagement of renewable resources, other than the theory of the commons, was performed by an experiment. Eighty three subjects, mostly recruited from the fisheries sector in Norway, were asked to manage the same simulated virgin fish stock, one subject at a time. Exclusive property rights were granted to rule out the commons problem. Despite perfect property rights, subjects consistently overinvested, leading to an average overcapacity of 60%. The resource was reduced by an average of 15% below its optimal level. Overcapacity and tough ‘‘quotas’’ resemble the situation in Norwegian and other fisheries during the past few decades. The likely explanation of the observed behaviour is mis- perception of feedback, a phenomenon that occurs in many experimental studies of dynamically complex systems. Such misperceptions add a new and important dimension to the problem of renewable resource management, beyond the commons problem. ( Commons Problem; Bioeconomics; Decision Making; Experimental Economics; Misperception of Feed- back) 1. Introduction There are innumerable cases of mismanagement—par- ticularly over-exploitation—of renewable resources such as fish, pastures, forests, and groundwater, as well as of resources that serve as regenerative sinks for pol- lution such as SO 2 , NO x , pesticides, and nutrients. There are at least two distinct classes of explanation, the sec- ond of which is studied in this paper: (1) The commons problem: With open access to a common resource, the benefits of over-exploitation ac- crue to the individual while the costs are borne by all. The inappropriate incentives lead to the ‘‘tragedy of the commons,’’ see Gordon (1954) and Hardin (1968). Ear- lier references such as Aristotle, Lloyd (1833/1977), Warming (1911) and Pigou (1932) indicate that the basic idea is not new. Ostrom (1990) uses the term ‘‘appro- priation problem’’ indicating the need to design rules and institutions to allocate rights and responsibilities. The commons problem is widely held to be the cause of mismanagement of common renewable resources. (2) The resource management problem, or ‘‘provi- sion problem’’ in Ostrom’s terminology: Even if the commons problem is absent or has been solved, a com- plicated management problem remains. This problem can be classified as a dynamic, nonlinear optimization problem under uncertainty and ambiguity. Only ap- proximate solutions to these types of problems exist, and state-of-the-art results are not necessarily known by interest groups and decision makers. Clark (1985, p. 11) points out this problem when he states that: ‘‘. . . the fishing industry’s apparent lack of concern over its own long-term welfare remains hard to explain, except per- haps on the basis of a real misunderstanding of the bio- economic system.’’ In this study, an experimental method has been used to investigate the management problem. The case is a fish resource, cod ( Gadus morhua ). Three questions are central: first, are there reasons to believe that actors in the fisheries sector misperceive the bioeconomics of their resource? Given a positive answer to this question, the next question turns on the mental models and de- cision rules that the actors apply, and how these differ from the perfect models and optimal rules. Thirdly, how can misperceptions be counteracted?