Investigating the Effect of Different Institutional Arrangements in a Irrigational Behavior Experiment with Power Asymmetries

Economy is full of opportunities through which individuals have to decide based on different rules. Modeling individuals' behaviors under these additional rules is pursued in laboratory economics. The present paper addresses some critical institutional questions in governance in the Iranian economy, utilizing laboratory economics. The data were collected and created out of 480 simulation runs of common pool resource harvesting where resource users had asymmetric power for harvesting the resource. Alternative institutional arrangements, each representing different governance of natural resources, were simulated in these experiments. This paper concentrates on three factors of harvesters communication, the origin of rules (the harvesters or the government), and rule enforcement (the amount and probability of violators' fines). The results indicate that in situations where participants are allowed to regulate, harvesting the natural resource is more equal than where the government is in charge of regulating. For an external regulation, the worst way to harvest, is when the government fails to guarantee the rule enforcement (the probability of a fine is low). Under such circumstances, resource harvesting is even more unequal than the open-access state. Exogenous regulation leads to crowding-out altruistic motivations.