Revenue-feedback and the institutional governance of global risky commons.

Abstract

The mitigation of the adverse effects of global warming poses the most pressing challenge concerning the sustainable governance of global risky commons (GRC)-global commons under risk of collapse. The collective risk dilemma (CRD) provides a convenient game-theoretical model to address key features of GRC, by framing the problem as one of cooperation. Here we employ the CRD to assess the relative effectiveness of both local, bottom-up and global, top-down (inspired) institutional designs and policies to solve GRC. To this end, we set up a framework in which institutions (local and global) are endogenously created and may apply rewards and impose sanctions based on endogenously generated resources. We find a new institutional paradigm, revenue-feedback (RF), that leads to sizeable improvements in the governance of GRC both at the local and global levels. Implementing RF implies employing the revenue from sanctions imposed on anti-social individuals to reward pro-social individuals. RF does not incur additional organizational costs compared to other existing policies while engaging all actors simultaneously in the policy process. The best results are obtained combining RF with the electoral model recently developed and with institutions are created at a local scale, in which case they prevail.