Moral Hazard and Free Riding in Collective Action
AbstractMost 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 InfoPaper 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.
Date of creation: Aug 2007
Date of revision:
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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
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Web page: http://www.nottingham.ac.uk/economics/cedex/
More information through EDIRC
Collective action; Moral hazard in teams; Lobby formation; Free-rider problem;
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
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