Robust Collective Agreements: A Theory of Cooperation Under Heterogeneity and Limited Enforcement

This paper develops a unified theoretical framework to explain why informal collective agreements frequently persist even when they deviate from welfare‐maximizing rules. It addresses four empirical puzzles of cooperation, commitment without enforcement, persistence of inefficient rules, the ambiguous role of inequality, and the coexistence of unequal treatment with equalizing outcomes, by introducing the concept of robustness: the ability of a rule to sustain cooperation under the weakest incentive conditions. Within a common stochastic repeated‐game setting, two archetypal forms of collective agreements are examined: club good agreements, with unequal contributions and equal benefits, and common pool agreements, with equal contributions and unequal benefits. Robust agreements are shown to exist broadly and to differ systematically across these institutional forms, yet in both cases, they minimize incentives to deviate while compressing disparities in expected utility. The analysis reconciles diverse empirical regularities, such as partial pooling, persistent inequality, and stability of informal arrangements, by shifting the focus from efficiency to robustness as the key organizing principle of sustainable cooperation under heterogeneity.