The Collective Action Problem : Within-group Cooperation and Between-group Competition in a Repeated Rent-Seeking Game

This paper analyzes the ability of group members to cooperate in rent-seeking in a context of between-group competition. For this purpose, we develop an infinitely repeated rent-seeking model with two groups where within-group cooperation is supported through the use of a double-edged trigger strategy. Indeed, each player in a group can optimally respond to the other members' strategies but can also play the best response of one's own group to the collective action of the rival group. We then characterize the conditions under which cooperation among fellow members within each group can be achieved as a stationary subgame perfect equilibrium. The main conclusion is that the larger group has more chances to maintain cooperation than the smaller group. Hence, in contrast with Olson's (1965) celebrated thesis but in accordance with many informal and formal observations, the larger group produces a higher level of collective action