What are some ways to overcome collective action problems?

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Expert Solution

A collective action problem exists where rational individual action can lead to a strictly Pareto-inferior outcome, that is, an outcome which is strictly less preferred by every individual than at least one other outcome.

Following are the ways in which collective action problem can be solved.

Increasing the Number of Strategies: The distributional problem associated with collective action problem can be solved by increasing the number of strategies. This is because existence of more strategies results in increase in the number of alternative outcomes from which players can select.
Perfect Information: Existence of perfect information either due to the ability of the parties involved to communicate or due to sequential interaction can solve the co-ordination aspect of the collective action problem.
Repeated Interaction: Repeated interaction causes dilemmas in the mind of players regarding the preferences of the other players. This is likely to make co-operation between the players a rational strategy rather than defecting or betraying.

Rahul Sunny answered 1 year ago

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