Collective Action

Players two mayors actions build the bridge or not

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Unformatted text preview: village in 100m. The costs of constructing the bridge is 150m. If no one decides to construct the bridge, the bridge is not built. If at least one of the mayors decides to go ahead with the project, the bridge is built and the costs are borne among the mayors that decide to go ahead.  ­ Players: two mayors  ­ Actions: build the bridge or not  ­ Payoffs: utility is equal to the benefits minus the costs  ­ Timing: actions taken simultaneously, static game Remedies Public goods and externalities are very similar problems. In both cases governments can bring an improvement over market provision (market failures)  ­ Pigouvian tax  ­ Subsidies  ­ Regulation  ­ Direct provision THE LOGIC OF COLLECTIVE ACTION [OLSON] “The idea that groups tend to act in support of their group interests is supposed to follow logically from this widely accepted premise of rational, self ­interested behaviour. In other words, if the members of some group have a common interest or objective, and if they would all be better off if that objective were achieved, it has been thought to follow logically that the individuals in that group would, if they were rational and self ­ interested, act to achieve that objective." “It is of the essence of an organization that it provides an inseparable, generalized benefit. It follows that the provision of public or collective goods is the fundamental function of organizations generally"...
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