Recent experiments have examined the joint problem of groups coordinating harvests from a common pool resource (CPR) and deterring outsiders from poaching the resource. However, in these studies user groups are set exogenously. In this paper, we consider the problem of managing and defending CPR adding the feature that CPR groups form endogenously. Our experiments were conducted in the field with members of Chilean TURFs and in the lab with Chilean university students. When a group of insiders formed a coalition, they were granted the right to extract the resource. Outsiders, those who chose not to join a fishing coalition, could poach the insiders resource illegally. Insiders could invest in monitoring for poaching, and the cost of these investments was the primary treatment variable. If an outsider was caught poaching they faced an exogenous sanction.
Our theoretical model predicts that the grand coalition will be stable and unique when the cost of monitoring is low. However, when insiders are not able to monitor for poaching, or the cost is so high that monitoring is not worthwhile, the equilibrium coalition is the smallest profitable coalition. These predictions are supported by our experimental results for TURF members. When the cost of monitoring was low, TURF members formed coalitions on average that were close to the grand coalition. Coalition sizes were smaller when monitoring was not available or very costly, but they were larger than the minimum profitable coalition size. In general, the ability of TURF members to form fishing coalitions reduced exploitation of the resource in comparison to the open access outcome. Results for students were somewhat different. Coalition sizes were very close to the minimum profitable coalition size. However, student coalition formation led to reduced harvests when the insiders could monitor the outsiders.
Overall, our results suggest that coalitions to manage CPR are likely to form, even when poaching is a significant problem, and coalition formation is associated with lower exploitation of CPR. Finally, coalition sizes are sensitive to the cost of deterring poaching; large coalitions can form when poachers are easily deterred, but smaller coalitions form when deterrence is difficult.