Common-pool resources exhibit characteristics of both private and public goods. Consumed through competitive effort and difficult to exclude from uncoordinated users, common-pool resources are susceptible to over-extraction and create incentives for users to ignore the social costs of their extraction decisions. The common-pool resource literature in recent decades has examined the first-order conditions necessary for institutions to emerge to solve the problems of competitive resource extraction and collective action management. This dissertation advances our understanding of the emergence of common-pool resource management by empirically addressing the factors influencing the decision to develop institutions to address collective action problems.

The setting to test the determinants of common-pool resource management comprises the groundwater basins of California. Groundwater basins in the state have competing users, which include urban, agricultural, and environmental constituents. In a semi-arid climate with limited surface water supplies and increasing demand for water resources, basins in California are susceptible to common-pool problems, including overdraft, seawater intrusion, and land subsidence. Unlike most states in the western United States, California does not proactively manage groundwater basins at the state level to address localized common-pool groundwater problems. Instead, local agencies and individual users are left with the choice of whether to collectively bargain and develop the institutional rules for groundwater basin management.

This dissertation answers three questions regarding common-pool resource governance that are raised in the California groundwater management example.

First, what are the determining factors in the emergence of groundwater management institutions? This research finds that groundwater institutions emerge where common-pool problems are severe and the benefits outweigh the transaction costs of forming and maintaining these institutions.

Second, given that local agencies and groundwater users collectively act to manage a groundwater basin, what institutions and formal rules will they adopt? This research finds that pumping restrictions, taxes, and adjudicated property rights are likely in groundwater basins where municipal water supply is the dominant water use, persistent overdraft is an issue, and seawater intrusion is a concern.

Finally, negotiations for establishing private property rights to groundwater are examined in California's adjudicated groundwater basins. An analytical framework is developed to test the importance of the concentration of groundwater use, heterogeneity of users, and aggregate number of users in avoiding costly litigation and reaching voluntary agreements in the shadow of the courts. The factors affecting contracting success are ambiguous. This result is explained, however, by legal uncertainty in the state's water rights doctrines.