Emergence of Cooperation in Public Goods Problems

Posted: 19 Feb 2008

See all articles by Dalibor Rohac

Dalibor Rohac

Legatum Institute; King's College London

Date Written: October 16 2007

Abstract

In this paper, we discuss several issues related to public goods problems. Unlike many Austrians, we do not think that the concept of public goods - or of collective action - is an inherently flawed idea, even though we reject the alleged welfare implications of public goods theory, as proposed by orthodox public finance literature. We argue that the structure of a generic public goods problem is a game of Chicken or an Assurance game, rather than a Prisoner's dilemma and that this has important implications with regard to the plausibility of cooperative outcomes. Namely, when the public goods problem has the weakest link structure and can be represented by an Assurance game, then the cooperative outcome will be self-enforcing. In many cases, the public goods problem can be transformed into a weakest link game or different mechanisms can be found to ensure cooperation. We also discuss the difference between a public goods problem and collusion. We assert that, unlike public goods problems, collusive agreements have the structure of a Prisoner's dilemma. Overall, our paper suggests that there are reasons to be optimistic about stability and efficiency of stateless societal orders.

Keywords: public goods, game of Chicken, Assurance game, Prisoner's Dilemma, paradox of cooperation

JEL Classification: C72, H41

Suggested Citation

Rohac, Dalibor, Emergence of Cooperation in Public Goods Problems (October 16 2007). Available at SSRN: https://ssrn.com/abstract=1094856

Dalibor Rohac (Contact Author)

Legatum Institute ( email )

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Mayfair, London, London W1J 5DW
United Kingdom

King's College London ( email )

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London, England WC2R 2LS
United Kingdom
07585303666 (Phone)

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