Common Pool

Posted in Finance, Accounting and Economics Terms, Total Reads: 502
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Definition: Common Pool

As the name suggests, it is a common fund or resource which is paid by all contributors and from which financial backing is provided. Here, the benefit passes to a single individual whereas the cost is incurred by all the people contributing to the pool. Considering this, they are highly regulated to reduce the possibility of any tragedy to the common people. This common pool can be either public, like a lake in a village or can be a private fund.


Explanation

Consider the lake in a village. It is public and hence can be used by everyone. Consider a situation where the water is being used by farmers for agriculture and also by washing men for laundry purposes. Now suppose that the detergents being used by the washer men started precipitating. This will make the use non beneficial for famers. Thus, though the benefit is by the washing men for their activities, the cost is being incurred by the farmers also.

 

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