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Moral hazard and free riding in collective action

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  • Vincent Anesi

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Abstract

Most political and economic theorists point to moral hazard in teams as the main obstacle to lobbies' collective action. In this paper, we address this important issue with a coalition-formation game. In the process of doing so, we characterize equilibrium lobby structures both in the absence and in the presence of moral hazard. Three notable results emerge from such an exercise: (i) an equilibrium lobby structure exists under both specifications of the model, (ii) moral hazard in teams may raise large groups' equilibrium lobby size, and (iii) it may also raise the total contribution to lobbying of large groups with low organizational costs.

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Bibliographic Info

Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 32 (2009)
Issue (Month): 2 (February)
Pages: 197-219

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Handle: RePEc:spr:sochwe:v:32:y:2009:i:2:p:197-219

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  1. Leonardo Felli & Antonio Merlo, 2001. "Endogenous Lobbying," PIER Working Paper Archive 04-043, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Oct 2004.
  2. John Duggan, . "Non-Cooperative Games Among Groups," Wallis Working Papers, University of Rochester - Wallis Institute of Political Economy WP21, University of Rochester - Wallis Institute of Political Economy.
  3. Keith Hartley & Todd Sandler, 2001. "Economics of Alliances: The Lessons for Collective Action," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 869-896, September.
  4. Baik, Kyung Hwan & Shogren, Jason F, 1995. " Competitive-Share Group Formation in Rent-Seeking Contests," Public Choice, Springer, vol. 83(1-2), pages 113-26, April.
  5. Francis Bloch & Santiago Sánchez-Pagés & Raphaël Soubeyran, 2006. "When does universal peace prevail? Secession and group formation in conflict," Economics of Governance, Springer, vol. 7(1), pages 3-29, 01.
  6. Mar? Paz Espinosa & Inés Macho-Stadler, . "Endogenous Formation Of Partnerships With Moral Hazard," UFAE and IAE Working Papers 448.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  7. repec:ags:afjare:141665 is not listed on IDEAS
  8. Le Breton, Michel & Salanie, Francois, 2003. "Lobbying under political uncertainty," Journal of Public Economics, Elsevier, vol. 87(12), pages 2589-2610, December.
  9. Santiago Sánchez-Pagés, 2007. "Endogenous coalition formation in contests," Review of Economic Design, Springer, vol. 11(2), pages 139-163, September.
  10. Pecorino, Paul, 2001. "Can by-product lobbying firms compete?," Journal of Public Economics, Elsevier, vol. 82(3), pages 377-397, December.
  11. Schneider, Friedrich & Pommerehne, Werner W, 1981. "Free Riding and Collective Action: An Experiment in Public Microeconomics," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 96(4), pages 689-704, November.
  12. Murdoch, James C. & Sandler, Todd & Vijverberg, Wim P. M., 2003. "The participation decision versus the level of participation in an environmental treaty: a spatial probit analysis," Journal of Public Economics, Elsevier, vol. 87(2), pages 337-362, February.
  13. Pecorino, Paul, 1998. "Is There a Free-Rider Problem in Lobbying? Endogenous Tariffs, Trigger Strategies, and the Number of Firms," American Economic Review, American Economic Association, vol. 88(3), pages 652-60, June.
  14. Baik, Kyung Hwan & Lee, Sanghack, 2001. "Strategic Groups and Rent Dissipation," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 39(4), pages 672-84, October.
  15. Saijo, Tatsuyoshi & Yamato, Takehiko, 1999. "A Voluntary Participation Game with a Non-excludable Public Good," Journal of Economic Theory, Elsevier, vol. 84(2), pages 227-242, February.
  16. Marick F. Masters & John T. Delaney, 1987. "Union political activities: A review of the empirical literature," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 40(3), pages 336-353, April.
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Cited by:
  1. David Rietzke & Brian Roberson, 2010. "The Robustness of ‘Enemy-of-My-Enemy-is-My-Friend’ Alliances," Purdue University Economics Working Papers 1258, Purdue University, Department of Economics.
  2. Zudenkova, Galina, 2012. "Lobbying as a Guard against Extremism," Working Papers 2072/184036, Universitat Rovira i Virgili, Department of Economics.
  3. Joan Esteban & Esther Hauk, 2008. "Leadership in Collective Action," UFAE and IAE Working Papers 756.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  4. Zudenkova, Galina, 2010. "Sincere Lobby Formation," MPRA Paper 28249, University Library of Munich, Germany.

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