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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.

Suggested Citation

  • Martin Kolmar & Andreas Wagener, 2010. "Inefficient Group Organization as Optimal Adaption to Dominant Environments," CESifo Working Paper Series 3157, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3157
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp3157.pdf
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    References listed on IDEAS

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    Cited by:

    1. Elsayyad, May & Konrad, Kai A., 2012. "Fighting multiple tax havens," Journal of International Economics, Elsevier, pages 295-305.

    More about this item

    Keywords

    conflict; incentives; group-size paradox;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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