Strategy22Handout - 12/2/2008 Collective Action Problems...

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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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This note was uploaded on 04/14/2010 for the course ECON 398 taught by Professor Emre during the Spring '07 term at University of Michigan.

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Strategy22Handout - 12/2/2008 Collective Action Problems...

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