Club-in-the-club: reform under unanimity

Erik Berglof, Mike Burkart, Guido Friebel () and Elena Paltseva

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. The threat of forming an “inner organization” can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.

JEL-codes: D2 D7 P4 (search for similar items in EconPapers)
Date: 2012-08
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Citations: View citations in EconPapers (8)

Published in Journal of Comparative Economics, August, 2012, 40(3), pp. 492-507. ISSN: 0147-5967

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http://eprints.lse.ac.uk/69541/ Open access version. (application/pdf)

Related works:
Journal Article: Club-in-the-club: Reform under unanimity (2012)
Working Paper: Club-in-the-Club: Reform under Unanimity (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:69541

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