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Inefficient Group Organization as Optimal Adaption to Dominant Environments

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  • Martin Kolmar
  • Andreas Wagener

Abstract

Contests between groups are plagued by intra-group externalities (freeriding). Yet, costless incentive schemes that entirely avoid free-riding within a group might not be desirable, neither individually nor socially. In contests among two groups, a relatively weak (i.e., small or unproductive) group will optimally not implement them because they compound strength differences between groups. If both groups rein in their intra-group externalities, they are both worse off, compared to a situation with free-riding, if they are relatively similar. If they are sufficiently heterogenous, the weak group loses at the expense of the relatively strong group.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3157.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3157

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Related research

Keywords: conflict; incentives; group-size paradox;

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References

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  1. Nitzan, Shmuel, 1991. " Rent-Seeking with Non-identical Sharing Rules," Public Choice, Springer, vol. 71(1-2), pages 43-50, August.
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  8. 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.
  9. Nitzan, Shmuel, 1994. " More on More Efficient Rent Seeking and Strategic Behavior in Contests: Comment," Public Choice, Springer, vol. 79(3-4), pages 355-56, June.
  10. Noh, Suk Jae, 2002. "Resource distribution and stable alliances with endogenous sharing rules," European Journal of Political Economy, Elsevier, vol. 18(1), pages 129-151, March.
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Cited by:
  1. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, vol. 86(2), pages 295-305.

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