Olson's Logic Revisited: The Role of Small Fixed Costs of Participation

University of Alabama Economics, Finance and Legal Studies Working Paper No. 04-04-01

28 Pages Posted: 22 Apr 2004

See all articles by Paul Pecorino

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies

Akram Temimi

University of Alabama, Tuscaloosa

Date Written: April 2004

Abstract

Recent work by Pecorino (1998, 1999) and Esteban and Ray (2001) has called into question one of the central propositions of Olson (1965) relating public good provision to group size. Pecorino addresses this issue in a repeated game context, while Esteban and Ray introduce a technology under which there is an increasing marginal cost of effort in providing the public good in a framework that allows credit market imperfections and non monetary contributions. In this paper we analyze the robustness of these results to a simple, but realistic extension of the respective models. In particular, we consider small fixed costs of participation which must be borne by potential contributors before their contributions can have a marginal impact on provision of the public good. If the public good is nonrival, then the results of Pecorino and Esteban and Ray are robust to the consideration of these fixed costs. However, if the public good is fully rival (but nonexcludable), then the existence of small fixed participation costs will generally restore one of Olson's central propositions: public goods will fail to be provided in large groups.

Keywords: Collective action, public goods, group size, repeated games

JEL Classification: D7, H4, C72

Suggested Citation

Pecorino, Paul and Temimi, Akram, Olson's Logic Revisited: The Role of Small Fixed Costs of Participation (April 2004). University of Alabama Economics, Finance and Legal Studies Working Paper No. 04-04-01. Available at SSRN: https://ssrn.com/abstract=534482 or http://dx.doi.org/10.2139/ssrn.534482

Paul Pecorino (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-0379 (Phone)
205-348-0590 (Fax)

Akram Temimi

University of Alabama, Tuscaloosa ( email )

Department of Economics, Finance and Legal Studies
P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-8961 (Phone)

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