Policy Implications of Institutional Arrangements for Sustainable Management of Common Pool Resources: The Case of Groundwater

In face of growing demands for and the finite character of many kinds of natural resources, developing management institutions, which ensure the sustainability of such resources is essential. Many natural resources are Common Pool Resources (CPRs), managed under different non-cooperative, cooperative, and external regulatory intervening frameworks. While early studies of non-cooperative CPR management suggest the inevitable "tragedy of the commons" this paper discusses how users can avoid the tragic outcomes by changing their decision making rationales and exploitation strategies. The paper introduces and compares various types of institutions, available to manage CPRs in general and groundwater in particular. The paper discusses how CPR users can improve their gains by considering the externalities and by developing long-term exploitation plans as opposed to ignoring the externalities and having short-term plans, which result in rapid exploitation of the resource, leading to the exhaustion or the so-called "tragedy of the commons".