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Strategy22Handout - Collective Action Problems Often the...

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12/2/2008 1 Collective Action Problems Often, the welfare of society is best served if individuals take a particular “socially responsible” action. On the other hand, individuals may not find it in their interest to take the “socially in their interest to take the socially responsible” action. There may be a conflict between the social desirable and the individually optimal actions Need models of public goods and externalities Free Rider Problems Every two years we are told to go vote and suffer bad weather and long waits, even though our own vote is not pivotal Every summer in California, we are asked to conserve electricity because of power conserve electricity because of power shortages If everyone is conserving electricity, my optimal action is to not conserve The savings from my conserving is small, but my personal benefit from consuming is large Free Rider Problems On collective farms in the USSR, workers found that they earned the same wage whether they were industrious, or slacked off Members of committees often find that others joined simply to get their participation on their joined simply to get their participation on their resumes, not to do any actual work The Free Rider Problem is like a Prisoner’s Dilemma with many people Tragedy of the Commons Farmers send cows out to graze on the common pasture Overgrazing causes milk yields to decrease
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