AbstractTraditional literature on common pool resources has shown that community management can produce sustainable outcomes, while simultaneously distributing benefits equitably within the resource community. However, its idealization of the resource community as a homogeneous and harmonious community has resulted in a failure to consider issues relating to the formation of resource communities, identity of the excluded sections and distribution of benefits within the geographical community. The paper argues that a study of individuals as members of coalitions will help to overcome this limitation. While there are a large number of possible coalitions that can be formed on the basis of alternative socio‐economic and cultural criteria, the resource community will ultimately be formed through the formation of a coalition that is stable against defection by any member. This coalition (corresponding to the core) maximizes net per capita benefits to its members.The arguments are supported by a field study of a water body in Bankura, India. Survey results show how the formation of caste‐based coalitions within a pluralistic community had led to the exclusion of some villagers from resource benefits. Copyright © 2008 John Wiley & Sons, Ltd and ERP Environment.