Club-in-the-Club: Reform under Unanimity
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Club-in-the-Club : Reform under Unanimity. / Berglöf, Erik; Burkart, Mike; Friebel, Guido; Paltseva, Elena.
Economic Policy Research Unit. Department of Economics, University of Copenhagen, 2009.Research output: Working paper › Research
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TY - UNPB
T1 - Club-in-the-Club
T2 - Reform under Unanimity
AU - Berglöf, Erik
AU - Burkart, Mike
AU - Friebel, Guido
AU - Paltseva, Elena
N1 - JEL classification: D2, D7, P4
PY - 2009
Y1 - 2009
N2 - In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. In the presence of externalities and an incomplete charter, the threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
AB - In many organizations, decisions are taken by unanimity giving each member veto power. We analyze a model of an organization in which members with heterogenous productivity privately contribute to a common good. Under unanimity, the least efficient member imposes her preferred effort choice on the entire organization. In the presence of externalities and an incomplete charter, the threat of forming an "inner organization" can undermine the veto power of the less efficient members and coerce them to exert more effort. We also identify the conditions under which the threat of forming an inner organization is executed. Finally, we show that majority rules effectively prevent the emergence of inner organizations.
KW - Faculty of Social Sciences
KW - organisationer
KW - organizations
KW - club good
KW - voting rules
KW - EU integration
M3 - Working paper
BT - Club-in-the-Club
PB - Economic Policy Research Unit. Department of Economics, University of Copenhagen
ER -
ID: 14178528