The Role of Wealth Inequality in Community Management of a Common‐Pool Resources Through Voluntary Sanctioning

ABSTRACT Community‐based regulation of common‐pool resources like fish stocks, irrigation, and clean air, depends on establishing rules to prevent over‐exploitation and sanctioning free‐riders. However, persistence of these social arrangements can be challenged when some individuals enjoy greater access to the common‐pool resource because of differences in wealth. Here, we investigated how wealth inequality impacts the management of common‐pool resources in self‐regulating communities that sanction over‐exploiting free‐riders. We used a game theoretic model to isolate the effect of inequality on resource management. Specifically, we employed a model where players decide both how much to contribute to the resource and whether to sanction those who contribute less than the socially agreed‐upon amount. Through Nash equilibrium analysis, our results showed a U‐shaped relationship between wealth inequality and resource sustainability: high sustainable provision of resources was achieved under conditions of both high inequality and high equality. Resources were cooperatively maintained under equality via sanctioning, but maintained solely by the wealthiest individual under high inequality through privatization of resources. Increased severity of imposed sanctions expanded the range of wealth inequality in which resources were managed cooperatively through the voluntary sanctioning mechanism. Conversely, the increased cost of imposing sanctions decreased the range of wealth inequality where voluntary sanctioning was employed. The impact of wealth inequality on community‐management of common‐pool resources appears to defy simple generalizations about there being trade‐offs between equity and efficiency of resource use.