Group Formation and Heterogeneity in Collective Action Games

Abstract

We present a simple model of voluntary groups in a collective action problem where individuals differ in their willingness to cooperate. The heterogeneity of individuals' preferences generally yields multiple equilibrium groups with different levels of cooperation. Voluntary participation in a binding contract to cooperate does not necessarily lead to the full cooperation. Applications to voluntary provision of public goods and cartel formation in oligopolistic markets are discussed.group formation, collective action, heterogeneous preferences, voluntary participation