What is a 'Common Pool Resource - CPR'

A common pool resource is 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.

BREAKING DOWN 'Common Pool Resource - CPR'

Common pool resources (CPR) such as forests, underground water basins, grasslands and fisheries are often managed by a combination of government action and market mechanisms. Sometimes a resource is small enough to be collectively managed by interested parties in an honor system; in other cases, valuable resources must be placed under a local government agency altogether. A key goal of CPR management is allowing a certain amount of the resource to be used during a given period while leaving the principal, so to speak, intact. CPR usage is governed by agreements that specify physical boundaries of the resource, parties involved, allocations, time limitations, authority for dispute resolution, enforcement means, etc.

Example of a Common Pool Resource

Suppose a fishery can sustainably yield 100,000 pounds of fish annually — that is, the core population of the fishery each year produces 100,000 pounds. 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 and gain more profits at the expense of others. If each company over-harvests by 1,000 pounds, the fishery will be over-harvested by 10,000 pounds, reducing the core fish population and its ability to produce the same level next year, leading to gradual depletion. Recognizing that it is in their long-term interest to sustain the fish population, though, the companies make an agreement to stick with their 10,000 quota and hire an independent third party to oversee that the agreement is carried out by each.

RELATED TERMS
  1. Common Resource

    A common resource is a resource, such as water or pasture, that ...
  2. Tragedy Of The Commons

    Tragedy of the commons refers to an economic problem in which ...
  3. Commodity Pool

    A commodity pool is a private investment structure that combines ...
  4. Natural Capital

    A reference to the stock of natural resources, such as water ...
  5. Pool Factor

    The pool factor is a measure of how much of the original loan ...
  6. Whole Pool

    In the mortgage-backed securities market, whole pools refer to ...
Related Articles
  1. Tech

    How to Choose a Cryptocurrency Mining Pool

    Here are some selection criteria cryptocurrency miners should consider before joining a crypto mining pool.
  2. Insights

    Should You Be Afraid Of Dark Pool Liquidity?

    Don't fear the deep end. Dark pool liquidity can help drive down stock cost for everyday investors.
  3. Personal Finance

    Dark Pools: The SEC Is Moving to Tighten Oversight

    The agency is concerned that dark pools' lack of transparency could disrupt the markets
  4. Tech

    Can Blockchain Technology Solve The Problem Of Illegal Fishing?

    Blockchain, the technology underlying bitcoin, has infinite uses--including stopping illegal fishing and even stopping human rights abuses.
  5. Tech

    The Number Of Dark Pools In Cryptocurrency Trading Is Increasing

    Dark pools, which conduct trades away from cryptocurrency exchanges, are increasing in crypto trading.
  6. Investing

    Assessing Range Resources Ahead of Earnings? (RRC)

    Wall Street expects Range Resources to report year-over-year declines in both revenue and earnings per share.
  7. Financial Advisor

    Top 5 Natural Resources Mutual Funds (FSCHX, AWTAX)

    Discover which mutual funds in the natural resources category are top-rated funds, and understand why these funds may be suitable as part of a portfolio.
  8. Insights

    Here Are the Countries With the Most Natural Resources

    Commodities are the raw materials for all products produced worldwide. This article lists the top 10 countries with the most natural resources.
  9. Investing

    Franklin Resources Stock Trades Ex-Dividend Wednesday (BEN)

    Franklin Resources will send its dividend payment on April 13 to shareholders of record as of March 31.
  10. Investing

    The Production Possibility Frontier (PPF)

    A production possibility frontier (PPF) is a range of answers to the question, “What is our maximum production capacity?”
RELATED FAQS
  1. How does Enterprise Resource Planning (ERP) assist in human resources planning?

    Read about how enterprise resource planning could help improve a company's human resources planning, both directly and indirectly. Read Answer >>
  2. How are capitalism and private property related?

    Read about the relationship between capitalism and private property rights, and learn why voluntary trade would collapse ... Read Answer >>
  3. Does common stock offer the best investment vehicle in a company or sector?

    Look at features of common stock, which make this a type of investment with possible upsides and several important manageable ... Read Answer >>
Hot Definitions
  1. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  3. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  4. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  5. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  6. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
Trading Center