Club-in-the-Club: Reform under Unanimity

Publikation: Working paperForskning

Dokumenter

  • Wp-09-07

    Forlagets udgivne version, 580 KB, PDF-dokument

  • Erik Berglöf
  • Mike Burkart
  • Guido Friebel
  • Elena Paltseva
In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. In the presence of externalities and an incomplete charter, the threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
OriginalsprogEngelsk
UdgiverEconomic Policy Research Unit. Department of Economics, University of Copenhagen
Antal sider37
StatusUdgivet - 2009

Bibliografisk note

JEL classification: D2, D7, P4

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