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The Collective Action Problem: Within-Group Cooperation and Between-Group Competition in a Repeated Rent-Seeking Game

  • Cheikbossian, Guillaume

This paper analyzes the ability of group members to cooperate in rent-seeking activities in a context of between-group competition. For this purpose, we develop an infinitely repeated rent-seeking game between two groups of different size. We first investigate Nash reversion strategies to support cooperative behavior in a given group before analyzing double-edge trigger strategies which have the property that cheating on the cooperative agreement in a given group is followed by non-cooperation in this group and cooperation in the rival group. The main conclusion is that the set of parameters for which cooperation can be sustained within the larger group as a subgame perfect outcome is as large as that for which cooperation can be sustained in the smaller group. Hence, in contrast with Olson’s (1965) celebrated thesis but in accordance with many informal and formal observations, the larger group is as effective as the smaller group in furthering its interest.

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Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 09-085.

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Date of creation: 24 Sep 2009
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Handle: RePEc:tse:wpaper:22192
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  1. Cheikbossian, Guillaume, 2009. "The Collective Action Problem: Within-Group Cooperation and Between-Group Competition in a Repeated Rent-Seeking Game," TSE Working Papers 09-085, Toulouse School of Economics (TSE).
  2. David S. Scharfstein, 1998. "The Dark Side of Internal Capital Markets II: Evidence from Diversified Conglomerates," NBER Working Papers 6352, National Bureau of Economic Research, Inc.
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  4. Lambson, Val Eugene, 1987. "Dynamic Behaviour in Large Markets for Differentiated Products," Review of Economic Studies, Wiley Blackwell, vol. 54(2), pages 293-300, April.
  5. Raghuram Rajan & Henry Servaes & Luigi Zingales, . "The Cost of Diversity: The Diversification Discount and Inefficient Investment," CRSP working papers 463, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  6. Potters, J.J.M. & Sloof, R., 1996. "Interest groups : A survey of empirical models that try to assess their influence," Other publications TiSEM ff27d5d8-f584-4386-a1fc-5, Tilburg University, School of Economics and Management.
  7. Pecorino, Paul, 1998. "Is There a Free-Rider Problem in Lobbying? Endogenous Tariffs, Trigger Strategies, and the Number of Firms," American Economic Review, American Economic Association, vol. 88(3), pages 652-60, June.
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  9. Lambson, Val Eugene, 1984. "Self-enforcing collusion in large dynamic markets," Journal of Economic Theory, Elsevier, vol. 34(2), pages 282-291, December.
  10. Congleton, Roger D & Shughart, William F, II, 1990. "The Growth of Social Security: Electoral Push or Political Pull?," Economic Inquiry, Western Economic Association International, vol. 28(1), pages 109-32, January.
  11. Nti, Kofi O, 1999. " Rent-Seeking with Asymmetric Valuations," Public Choice, Springer, vol. 98(3-4), pages 415-30, March.
  12. Yildirim, Huseyin, 2005. "Contests with multiple rounds," Games and Economic Behavior, Elsevier, vol. 51(1), pages 213-227, April.
  13. Bornstein, Gary & Gneezy, Uri & Nagel, Rosmarie, 2002. "The effect of intergroup competition on group coordination: an experimental study," Games and Economic Behavior, Elsevier, vol. 41(1), pages 1-25, October.
  14. Baik, Kyung Hwan & Lee, Sanghack, 2001. "Strategic Groups and Rent Dissipation," Economic Inquiry, Western Economic Association International, vol. 39(4), pages 672-84, October.
  15. Katz, Eliakim & Nitzan, Shmuel & Rosenberg, Jacob, 1990. " Rent-Seeking for Pure Public Goods," Public Choice, Springer, vol. 65(1), pages 49-60, April.
  16. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  17. Nitzan, Shmuel, 1991. "Collective Rent Dissipation," Economic Journal, Royal Economic Society, vol. 101(409), pages 1522-34, November.
  18. Davis, Douglas D & Reilly, Robert J, 1999. " Rent-Seeking with Non-identical Sharing Rules: An Equilibrium Rescued," Public Choice, Springer, vol. 100(1-2), pages 31-38, July.
  19. Kristov, Lorenzo & Lindert, Peter & McClelland, Robert, 1992. "Pressure groups and redistribution," Journal of Public Economics, Elsevier, vol. 48(2), pages 135-163, July.
  20. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
  21. Konrad, Kai A., 2009. "Strategy and Dynamics in Contests," OUP Catalogue, Oxford University Press, number 9780199549603, March.
  22. repec:ner:tilbur:urn:nbn:nl:ui:12-73373 is not listed on IDEAS
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