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Moral Hazard and Free Riding in Collective Action

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  • Vincent Anesi

    ()
    (University of Nottingham)

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 specications 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

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2007-04.

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Date of creation: Aug 2007
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Handle: RePEc:cdx:dpaper:2007-04

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Keywords: Collective action; Moral hazard in teams; Lobby formation; Free-rider problem;

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References

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  1. 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.
  2. Paz Espinosa, Maria & Macho-Stadler, Ines, 2003. "Endogenous formation of competing partnerships with moral hazard," Games and Economic Behavior, Elsevier, vol. 44(1), pages 183-194, July.
  3. Schneider, Friedrich & Pommerehne, Werner W, 1981. "Free Riding and Collective Action: An Experiment in Public Microeconomics," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 689-704, November.
  4. 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.
  5. Santiago Sanchez-Pages, 2007. "Endogenous Coalition Formation in Contests," ESE Discussion Papers 158, Edinburgh School of Economics, University of Edinburgh.
  6. 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.
  7. Le Breton, Michel & Salanie, Francois, 2003. "Lobbying under political uncertainty," Journal of Public Economics, Elsevier, vol. 87(12), pages 2589-2610, December.
  8. John Duggan, . "Non-Cooperative Games Among Groups," Wallis Working Papers WP21, University of Rochester - Wallis Institute of Political Economy.
  9. repec:ags:afjare:141665 is not listed on IDEAS
  10. 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.
  11. 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.
  12. Pecorino, Paul, 2001. "Can by-product lobbying firms compete?," Journal of Public Economics, Elsevier, vol. 82(3), pages 377-397, December.
  13. Baik, Kyung Hwan & Lee, Sanghack, 2001. "Strategic Groups and Rent Dissipation," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 672-84, October.
  14. 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.
  15. 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.
  16. 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.
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Cited by:
  1. David Rietzke & Brian Roberson, 2013. "The robustness of ‘enemy-of-my-enemy-is-my-friend’ alliances," Social Choice and Welfare, Springer, vol. 40(4), pages 937-956, April.
  2. Zudenkova, Galina, 2012. "Lobbying as a Guard against Extremism," Working Papers 2072/184036, Universitat Rovira i Virgili, Department of Economics.
  3. Zudenkova, Galina, 2010. "Sincere Lobby Formation," Working Papers 2072/151545, Universitat Rovira i Virgili, Department of Economics.
  4. Joan Esteban & Esther Hauk, 2009. "Leadership in Collective Action," Working Papers 362, Barcelona Graduate School of Economics.

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