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Club-in-the-Club: Reform under Unanimity

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

No 2009-07, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

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. In the presence of externalities and an incomplete charter, 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.

Keywords: organizations; club good; voting rules; EU integration (search for similar items in EconPapers)
JEL-codes: D2 D7 P4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm and nep-pol
Date: 2009-07
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Related works:
Journal Article: Club-in-the-club: Reform under unanimity (2012) Downloads
Working Paper: Club-in-the-club: reform under unanimity (2012) Downloads
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