Decentralized management of common property resources: experiments with a centuries-old institution

For centuries, villages in the Alps employed a special system for managing their common properties. Individual users could inspect other users at their own cost and impose a predetermined sanction (a fine) when a free rider was discovered. The fine was paid to the user who found a violator. Experiments with the institutions demonstrate that this mechanism considerably improves efficiency of resource use. The classical model of identical selfish agents does not capture the data as well as amodel with heterogeneous and linear other-regarding preferences. Altruism and especially potentially dysfunctional behavior, such as spite and mistakes, play important positive roles.