Collective Action Problems

Why do individual incentives sabotage production of public goods?

Takeaway Points

  1. A collective action problem is a large-scale version of the prisoner’s dilemma.
  2. No one wants to produce the public good because it is costly and the benefits go to everyone.
  3. Thus, individuals free ride—they do not produce the good in the hope that someone else will.
  4. Ultimately, parties are considerably worse off than if they could credibly agree to produce the good despite its costs.