Issues of collective action: common agency, partial cooperation, and clubs

Kevin Jay Siqueira

ISU General Staff Papers from Iowa State University, Department of Economics

Abstract: The dissertation explores two topics of collective action. In the first two chapters, a modified common agency model is developed and used to investigate the impact of partial cooperation on agent incentives. Partial cooperation is introduced into the model through the assumption that it is only the smallest group of homogenous principals who are capable of overcoming the free-riding problem. In the first of two scenarios examined, the case where principals move simultaneously, it is shown that partial cooperation is self-defeating from the organizing principals' perspective despite a strengthening of agent incentives and effort. Consequently, there is no incentive for the principals to organize. In the second scenario, under the assumption that the smallest group of homogenous principals have a first-mover advantage, it is shown that this is not only individually beneficial to the cooperating principals, but the outcome in terms of agent incentives and effort, is also constrained Pareto efficient, better than even the standard, third-best common agency outcome. The interesting result from this last scenario illustrates the possibility that partial cooperation, when coupled with a strategic advantage, can improve efficiency;The second topic involves fixing the notion of the relation of cost sharing and membership size within the framework of club goods. The intuition is relatively straightforward and rests on the idea that with a given membership base and everything else held constant, a rise in costs will increase the benefit of cost sharing while a fall will reduce them. The third chapter shows that at least in certain cases, this intuition holds and as a result, depending on whether the benefits rise or fall sufficiently, one would expect to see a resulting rise or fall in membership.

Date: 1998-01-01
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