Common Pool Resource - CPR

AAA

DEFINITION of 'Common Pool Resource - CPR'

A resource that benefits a group of people, but which provides diminished benefits to everyone if each individual pursues his or her own self interest. The value of a common-pool resource can be reduced through overuse because the supply of the resource is not unlimited, and using more than can be replenished can result in scarcity. Overuse of a common pool resource can lead to the tragedy of the commons problem.

INVESTOPEDIA EXPLAINS 'Common Pool Resource - CPR'

Common-pool resources, such as forests, are often managed by a combination of governments and markets. This can be done by only allowing a certain amount of the resource to be over a period of time, allowing for a core section of the resource to remain intact.


For example, a fishery can sustainably yield 100,000 pounds of fish annually, and the market price of a pound of fish is $4. Ten companies agree to harvest 10,000 each. In the absence of regulation, each company would harvest more than its allotted quota in order to sell more fish at $4 a pound. If each company over harvests by 1,000 pounds the fishery will over harvested by 10,000 pounds, and will not be able to produce the same level next year.

RELATED TERMS
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s ...
  2. John F. Nash Jr.

    An American mathematician who won the 1994 Nobel Memorial Prize ...
  3. Tragedy Of The Commons

    An economic problem in which every individual tries to reap the ...
  4. Pareto Efficiency

    An economic state where resources are allocated in the most efficient ...
  5. Game Theory

    A model of optimality taking into consideration not only benefits ...
  6. Nash Equilibrium

    A concept of game theory where the optimal outcome of a game ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our ...

  2. Options & Futures

    Explaining The World Through Macroeconomic ...

  3. Options & Futures

    Game Theory: Beyond The Basics

  4. Fundamental Analysis

    The Basics Of Game Theory

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center