Professor Ostrom is interested in exploring how institutional rules affect the structure of action situations within which individuals face incentives, make choices, and jointly affect each other. Problems involving collective goods and common-pool resource systems, and how various types of institutions enhance or detract from the capabilities of individuals to achieve equitable, workable, efficient solutions are a central theoretical concern. In urban settings she has been interested in the problems of collective action where citizens face problems of crime, poor education, and deteriorating environmental conditions.

She is also interested in the same problems as they relate to resource problems in the Third World, particularly problems of collective action related to forests, fisheries, grazing areas, agricultural lands, and water systems. A major study of institutions and forests is being initiated as part of an effort to study the inter-relationships between local and global commons. Professor Ostrom is currently working with colleagues in several tropical countries to investigate the impacts of diverse institutional arrangements on forest conditions and on global environmental change. The Workshop in Political Theory and Policy Analysis emphasizes theory and its application to policy-related research. Research focuses on the effect of institutional arrangements upon the incentives that people face and consequently upon individuals' behavior. Both micro and macro analyses of institutions in diverse countries are conducted by Research Associates, Visiting Scholars and Indiana University students.