Collective action problems

Since the foundational work of Mancur Olson (1965), the concept of collective action has gained prominence in all of the social sciences. Given the structure of an initial situation, collective action problems occur when individuals, as part of a group, select strategies generating outcomes that are suboptimal from the perspective of the group. In the most commonly examined case, individuals are involved in a collective action game where the unique Nash equilibrium for a single iteration of the game yields less than an optimal outcome for all involved. If such a game is finitely repeated and individuals share complete information about the structure of the situation, the predicted outcome for each iteration is the Nash equilibrium of the constituent game. If uncertainty exists about the number of iterations, or if iterations are infinite, possible equilibria explode in number. Among the predicted equilibria are strategies yielding the deficient Nash equilibria, optimal outcomes, and virtually everything in between. The problem of collective action is finding a way to avoid deficient outcomes and to move closer to optimal outcomes. Those who find a way to coordinate strategies receive a “cooperation dividend” equal to the difference between the payoffs at a deficient outcome and the more efficient outcome.

Public choice theorists have focused primarily on those collective action problems related to public goods, common-pool resources, and club goods. All three of these types of goods potentially involve deficient equilibria in provision or consumption activities.