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Equal, proportional, and mixed sharing of cooperative production under the threat of sabotage

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  • Jörg Franke

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Abstract

This paper analyzes the consequences of a parametrized class of sharing rules on the propensity of individuals to sabotage each other in a cooperative production framework. The considered sharing rules include equal and proportional sharing as special cases and are parametrized with respect to their sensitivity to relative input contributions. This parameter affects the equilibrium provision of productive individual labor (that increases the respective individual input contribution) but also the propensity to sabotage others (which decreases the input contributions of sabotaged individuals). The theoretical analysis shows that sharing rules in which more weight is put on equal sharing induce zero sabotage in equilibrium; however, they might also lead to inefficient underproduction. In contrast, sharing rules that are highly sensitive with respect to relative input contributions lead to destructive sabotage activities and moreover to inefficient overproduction. Copyright Springer-Verlag Wien 2014

Suggested Citation

  • Jörg Franke, 2014. "Equal, proportional, and mixed sharing of cooperative production under the threat of sabotage," Journal of Economics, Springer, vol. 113(3), pages 253-273, November.
  • Handle: RePEc:kap:jeczfn:v:113:y:2014:i:3:p:253-273
    DOI: 10.1007/s00712-013-0371-3
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    File URL: http://hdl.handle.net/10.1007/s00712-013-0371-3
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    References listed on IDEAS

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    Keywords

    Sharing rules; Sabotage; Cooperative production; C72; D61; D86;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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