Abstract
There is empirical evidence of income inequality having a negative effect on common-pool resource management, and contributing to an unequal sharing of the resource. I show that if utility is assumed to be S-shaped, non-cooperative game theory can be used to explain this evidence. When utility is S-shaped, income inequality does have a negative effect on cooperation, except at very low income levels, and makes an uneven distribution of the gains from cooperation efficient. The model also explains why sometimes the poor and sometimes the rich should get the larger share of the benefits from cooperation. In the light of this model, alms-giving, proportional distribution of gains, unequal input of labor and even a certain amount of free-riding can be seen as efficient means of enabling cooperation.