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. Pareto Efficiency

    An economic state where resources are allocated in the most efficient ...
  4. Tragedy Of The Commons

    An economic problem in which every individual tries to reap the ...
  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 History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Options & Futures

    Explaining The World Through Macroeconomic Analysis

    From unemployment and inflation to government policy, learn what macroeconomics measures and how it affects everyone.
  3. Options & Futures

    Game Theory: Beyond The Basics

    Take your game theory knowledge to the next level by learning about simultaneous games and the Nash Equilibrium.
  4. Fundamental Analysis

    The Basics Of Game Theory

    Break down and examine the potential consequences of economic/financial scenarios.
  5. Taxes

    What are the tax incentives or disincentives to vertical integration?

    Merging companies through vertical integration can provide companies in the United States with a marginally advantageous position in terms of taxation.
  6. Economics

    What is the difference between marginal utility and marginal benefit?

    Learn more about the different interpretations, uses, and implications of marginal benefit and marginal utility in economic theory.
  7. Fundamental Analysis

    How can quantitative easing be effective in the economy?

    Take a deeper look at the impacts of the Federal Reserve's large scale asset purchase plan, better known as quantitative easing, or QE.
  8. Economics

    How do you quantify price elasticity?

    Learn how to calculate the coefficient for price elasticity, enabling you to approximate how sensitive supply and demand variables are to changes in price.
  9. Fundamental Analysis

    What's the difference between r-squared and correlation?

    Discover how R-squared calculations determine the practical usefulness of beta and alpha correlations between individual securities and aggregate indexes.
  10. Economics

    What are the major costs to a firm when pursuing vertical integration?

    Following a vertical integration, there are initial setup costs and additional administrative costs as well as other costly complications.

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center