Working Paper: NBER ID: w30991
Authors: Marco Battaglini; Thomas R. Palfrey
Abstract: We study a standard collective action problem in which successful achievement of a group interest requires costly participation by some fraction of its members. How should we model the internal organization of these groups when there is asymmetric information about the preferences of their members? How effective should we expect it to be as we increase the group’s size n? We model it as an optimal honest and obedient communication mechanism and we show that for large n it can be implemented with a very simple mechanism that we call the Voluntary Based Organization. Two new results emerge from this analysis. Independently of the assumptions on the underlying technology, the limit probability of success in the best honest and obedient mechanism is the same as in an unorganized group, a result that is not generally true if obedience is omitted. An optimal organization, however, provides a key advantage: when the probability of success converges to zero, it does so at a much slower rate than in an unorganized group. Because of this, significant probabilities of success are achievable with simple honest and obedient organizations even in very large groups.
Keywords: Collective Action; Organizations; Asymmetric Information; Threshold Contribution Game; Communication Mechanisms
JEL Codes: C72; D71; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| group size (n) (C92) | probability of success in collective action (D70) |
| threshold for participation (mn) (C24) | probability of success in collective action (D70) |
| presence of an organization (L39) | probability of success in collective action (D70) |
| Volunteer-Based Organization (VBO) (L31) | probability of success in collective action (D70) |
| optimal honest and obedient mechanism (C71) | limit probability of success in collective action (D70) |
| group size (n) (C92) | rate of decline in success probability (C41) |