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Free-Rider Problems in the Production of
Collective Goods
Jean Hampton
Economics and Philosophy / Volume 3 / Issue 02 / October 1987, pp 245 - 273
DOI: 10.1017/S0266267100002911, Published online: 05 December 2008
Link to this article: http://journals.cambridge.org/abstract_S0266267100002911
How to cite this article:
Jean Hampton (1987). Free-Rider Problems in the Production of Collective
Goods. Economics and Philosophy, 3, pp 245-273 doi:10.1017/
S0266267100002911
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Economics and Philosophy, 3,1987, 245-273. Printed in the United States of America.
FREE-RIDER PROBLEMS IN THE
PRODUCTION OF COLLECTIVE
GOODS
JEAN HAMPTON
University of Pittsburgh
There has been a persistent tendency to identify what is called "the free-
rider problem" in the production of collective (or public) goods with the
prisoner's dilemma. However, in this article I want to challenge that
identification by presenting an analysis of what are in fact a variety of
collective action problems in the production of collective goods. My
strategy is not to consult any intuitions about what the free-rider prob-
lem is; rather I will be looking at the problematic game-theoretic struc-
tures of various situations associated with the production of different
types of collective goods, thereby showing what sorts of difficulties a
community concerned with their voluntary production would face. I call
all of these dilemmas free-rider problems because in all of them certain
individuals find it rational to take advantage of others' willingness to
contribute to the good in a way that threatens its production. Some
readers may feel that the term 'free-rider problem' is so identified with
the prisoner's dilemma that my extension of the term in this way "jars";
if so, I invite them to coin another word for the larger phenomenon. My
aim is not to engage in linguistic analysis but to attempt at least a partial
analysis of the complicated structure of collective good production.
In fact, free-rider problems of this sort are neither purely mathemati-
cal nor purely practical difficulties; they are a function of both the mathe-
matical structure of the situation and of human psychology. If we believe
that human beings act in ways that are primarily, or even exclusively,
The author would like to thank David Gauthier, Isaac Levi, Alan Nelson, Christopher
Morris, Yoram Gutgeld, Jon Elster, a referee for Economics and Philosophy, and Russell
Hardin (whose work sparked these speculations) for their very helpful comments on
earlier drafts of this paper.
1987 Cambridge University Press 0266-2671/87 $5.00 + .00 245
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246 JEAN HAMPTON
self-interested, then producing these goods becomes problematic when
the game-theoretic structures underlying their production present to
people exploitative opportunities that are individually rational but collec-
tively irrational for them to take. So, once we understand these various
mathematical structures, we will see when and how human self-interest
can derail the production of these goods.
But it turns out that self-interest is not as much the enemy of their
production as traditionally thought. I will argue that many collective
action problems are (or can be transformed to become) coordination rather
than conflict dilemmas, so that the production of collective goods in
many situations need not require help in the form of sanctions from the
long arm of the state. Hence my analysis should be good news to those
who wish to encourage politically uncoerced cooperation.
I. THE "CLASSIC" BUT INCORRECT PD ANALYSIS OF FREE
RIDING
Stating the nature of the free-rider problem in English appears easy: any
public good which is indivisible but nonexcludable would seem to be
one whose benefits an individual can enjoy without paying for them, but
if too many people try to take this "free ride," either no amount of the
good, or else only a less than socially optimal amount, will be produced.
Nonetheless, this statement of the nature of the problem is blurry.
Rawls (1971, p.267) makes an attempt to get a better statement of it as
follows:
where the public is large and includes many individuals, there is a tempta-
tion for each person to try to avoid doing his share. This is because what-
ever one man does, his action will not significantly affect the amount
produced. He regards the collective action of others as already given one
way or the other. If the public good is produced his enjoyment of it is not
decreased by his not making a contribution. If it is not produced his action
would not have changed the situation anyway.
1
Russell Hardin (1971; 1982, chapter 2, esp. pp. 25ff) has constructed the
game-theoretic matrix suggested by Rawls's remarks, and it is repro-
duced in Figure 1. It depicts a situation in which the collective good will
not exist unless at least two people work to produce it; and the more of
them who produce it, the less the cost of production to each. In this
matrix, the individual's preferences are compared with the preferences
of the rest of the group. For our purposes, only the individual's prefer-
ences are important, hence they are underlined (1 is most preferred, 4 is
least preferred). Note that they match the preferences of any participant
of a prisoner's dilemma. In this situation, it is rational for the individual
1. This passage is also cited by Richard Tuck (1979, p. 147).
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L i
L2
4, 3
3_,3
FREE RIDERS AND COLLECTIVE GOODS 247
THE COLLECTIVE
Pay Not Pay
THE
INDIVIDUAL
Pay
Not
Pay
FIGURE 1
not to pay, no matter what the others do (assuming standard probability
assessments). And since every other individual would have the same
preferences relative to the rest of the collective, then it seems that it isn't
rational for any of them to pay the cost of production. Hardin concludes
that the voluntary production of collective goods can only succeed when
this PD interaction is part of a series of such interactions, or when it is
embedded in a wider set of interactions such that the cooperative action
dominates (1982, chapters 9-12). (Note that it might also be solved if
each player has the rather unusual probability judgment that the others
are likely to do what she or he does.
2
)
However, a number of theorists, including Hardin himself, have
questioned the strict equation of free-rider problems with prisoners'
dilemmas.
3
1 will now argue that they are right to do so.
II. DEFINING COLLECTIVE GOODS
Collective goods can be defined as goods that benefit a collective and
that are "indivisible" or "in joint supply," that is, making them available
to one person in the community makes them available to all. Free-rider
problems arise in the production of these goods when benefits from
them are either difficult or impossible to exclude from people who do not
2. For more on this possible (but controversial) solution to PD games, see Jeffrey (1965).
3. See Hardin (1982, chapter 4, pp. 58-61). Taylor and Ward (1982) want to argue that
many free-rider problems are not PD's but chicken games. Frohlich, Oppenheimer, and
Young (1971) suggest that the PD is not the correct game-theoretic structure, and
Frohlich and Oppenheimer (1970 and 1978) show that there are situations in which
voluntary production of these goods is individually rational. This argument is extended
and deepened in Frohlich, Hunt, Oppenheimer, and Wagner (1975), which is discussed
in footnote 4.
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248 JEAN HAMPTON
Amount
of
Good
9(x)
Total Contributions
FI GURE 2
contribute to their production. I will contend in this paper that under-
standing particular free-rider problems depends upon understanding the
relationship between the production structure of the collective good in ques-
tion and the individual group member's expected costs and benefits asso-
ciated with its production. My strategy for revealing these problems must
therefore begin with a "technological" definition of different kinds of
collective goods: that is, I will define them not by aggregating individual
contributions and benefits, but by aggregating production contributions
(regardless of who pays) and amounts of the good thereby generated.
4
As Hardin (1982, chapter 4) has discussed, some collective goods
only exist after a substantial amount has been contributed to their pro-
duction, and then do not increase in quantity or quality if any further
contributions are made. Figure 2 depicts such a good. These goods have
been called "pure step goods" (or "lumpy goods") because their creation
4. I am indebted to Jack Hirschleifer for this characterization of my approach. I developed
this approach, as well as the arguments in this paper, in ignorance of the trailblazing
paper of Frohlich et al. (1975), who also insisted that free-rider problems have to do
with "the shape of [individuals'] utility functions and of the production function govern-
ing the supply of the collective good" (p. 328). However, to make this point, they
followed Schelling (1973) in employing a graphical representation of n-person, binary
choice games with externalities in which the number of contributions to the good is
represented on the horizontal axis and an individual's benefit from the good is repre-
sented on the vertical axis. Although this technique enabled them to show that some
free-rider problems are not prisoner's dilemmas, it did not allow them to show that,
depending upon the extent to which a collective good is (or can be) produced in larger
or smaller increments, a variety of (primarily coordination) problems can arise in con-
necting possible producers to the good's (naturally or artificially defined) increment(s).
In this paper I am experimenting with the use of a different technique in order to make
this general point.
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FREE RIDERS AND COLLECTIVE GOODS 249
Aaount
of
Good
Total Contributions
FIGURE 3
involves taking one big production step and no more. Examples of these
goods include the election of a political candidate and objects such as
bridges (half a bridge is no bridge at all). We can define this type of good
using the following step function: 8(x) = 0 for x < c; = k for x 2 c.
Other goods come into existence in degrees of quantity or quality,
and successive contributions to their production result in further incre-
ments of the good (in quantity or quality). I call such goods "incremental
collective goods." They can vary from being quite "steppy," as the graph
in Figure 3 represents, so that a certain fairly large contribution level
must be reached in order for an increment of the good to be produced
(for example, the construction of railway lines connecting small towns),
to being completely continuous such that any contribution, no matter
how small, will result in some increase in the good (e.g., clean air or
clean water), until some natural boundary is reached.
Let us define the function in Figure 3 as follows: G
v
=
o
2 A# where v is
the total number of increments produced (at a given contribution level)
and Ag
a
is the ath increment of the good. Note that we can define a
continuous incremental good as a function of contribution level (c) in the
following way:
G(c) = dg(c')
c'=0
where g is a function which takes contribution levels as arguments and
which measures the rate of increase in the amount of the good being
produced.
Finally, collective goods can have a "mixed structure." For example,
bringing a collective good into existence can initially require a large
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250 JEAN HAMPTON
production step but increasing this good in quality or quantity thereafter
can require only small contributions over a certain range. Hence, al-
though creating a minimally effective bridge over a river is a step good,
this bridge's strength and effectiveness might be increased by reinforc-
ing its structure up to a certain point, so that after a certain large step
such as the one represented in Figure 2, the good subsequently has the
sort of incremental or continuous structure which is represented in Fig-
ure 3, and which we could describe using the following step function:
dx =0 for x < c; = f(x) for x 5= c where f(x) is a function with /(c) = k and
which monotonically increases (where it may or may not be continuous).
Or we might have a "partial step good in reverse," that is, a good which
exists naturally at some level and which does not decrease with con-
sumption until some critical consumption point is reached. This good
can be defined with the following function: O(x) = k for x = c and 0(x) =
C(x) for x > c where /' is a monotonically decreasing function whose
maximum value is k. (Again/' may or may not be continuous.)
A pure step good is really just a collective good with only a single
increment, and a mixed good is just an incremental good whose incre-
ments are vastly unequal in size. So we might say that all collective
goods are incremental in different ways: some have only one increment
(these are step goods); some have more than one increment, where the
size of the increments can vary and where there may or may not be some
natural bound on how many increments can be produced; and some
goods have increments that are infinitesimally small (continuous goods).
But for purposes of understanding the problems involved in producing
collective goods, there is a significant distinction between what I will call
step goods, which have only one increment, and what I will call incre-
mental goods, which have more than one increment (and which include
mixed goods and continuous goods). This two-part classification is what
I will be primarily relying upon in the rest of this article.
I I I . THE "BATTLE-OF-THE-SEXES" PROBLEM IN THE SELECTION
OF PRODUCERS OF STEP GOODS
We begin by examining free-rider problems involved in step good pro-
duction. There are two places in which these problems can occur: In this
section we will explore problems involved in the selection of producers to
produce the good; and in the next section we will look at problems
involved in the actual production of the good by those selected to do so.
To show that what are called "Battle-of-the-Sexes" problems are in-
volved in the selection of producers of a step good, I will use as an
example of the production of such a good, Hume's meadow-draining
project:
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FREE RIDERS AND COLLECTIVE GOODS 251
Two neighbours may agree to drain a meadow, which they possess in
common; because 'tis easy for them to know each other's mind; and each
must perceive, that the immediate consequence of his failing in his part, is,
the abandoning of the whole project. But 'tis very difficult, and indeed
impossible, that a thousand persons shou'd agree in any such action; it
being difficult for them to concert so complicated a design, and still more
difficult for them to execute it; while each seeks a pretext to free himself of
the trouble and expense, and wou'd lay the whole burden on others. (Ill,
ii, vii [1978, 538])
I will interpret Hume's remarks so that the situation has the following
structure.
1. Draining the meadow is a collective good: i.e., it is indivisible, non-
excludable, and a benefit to the group.
2. It is a step good. It does not make sense to say that the drained
meadow can be "incrementally increased" in either quantity or quality
after it comes into existence.
3. Individual production costs and benefits from the good are well de-
fined and commonly known, so that individual preferences for pro-
ducing the good are commonly known.
4. The group involved in producing the good is what Olson (1965, pp.
22-36 and 48-50) calls "latent" as opposed to "privileged" because
there is no individual in the group for whom V, C
T
> 0. Here and in
the rest of the paper V, is the amount of benefits to the ith individual
and C
T
is the total cost.
5. Production costs can be split in a variety of ways among the 1,000
group members (that is, the group can define production units in a
variety of ways, and assign any number of group members to these
units), but the minimum number of people capable of producing the
good is two.
6. Finally, individual costs to produce the good are not "retrievable." An
individual cannot recoup whatever he pays to drain the meadow
(e.g., monetary costs) before the good's production is completed.
We shall vary each of the last four features of the example in this and the
next section in order to reveal different types of free-rider problems in
the production of step goods. But supposing all six hold, what is the
game-theoretic structure of this situation?
Consider that., in order to get the meadow drained, Hume's people
must not only decide how many of their number shall participate in the
good's production (as we noted, it must be at least two), but they must
also decide who these producers will be if they choose a number below
1,000. So they have potentially a two-pronged selection problem here:
they must determine the number of producers, and they must define the
identity of these producers. Assuming people are largely self-interested,
what are their likely preferences in this sort of situation? We would need
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252 JEAN HAMPTON
a 1,000-person matrix to represent them properly, but because I have as
little inclination to provide such a matrix as the reader has to see one, I
will simplify the situation by supposing there are only three people
involved, and then describe their preferences so as to reveal the game-
theoretic structure of this type of situation, whether there are three
people or 1,000 people involved.
5
Clearly each player would most prefer the outcome in which the
other two players drain the meadow and she languishes at home, eventu-
ally enjoying the good produced at no cost to her. Next best is the
situation where all of them share the work to be done, which is better
than the situation where she and only one other player split the work
between them (doing half of the work is worse than doing a third of it).
But this option is substantially better than the situation in which the
meadow isn't drained because none of them or only one of them is
willing to do it, and of course the worst situation for each of them is
where she puts in work almost equal to the benefit to be received from
the good to be produced, but is never assisted by anyone else, so that the
good never gets produced and she loses whatever resources she put into
the attempt to produce it.
There is a nice sense in which each player in this sort of game wants
to "ride free" on the backs of the other players, insofar as each wants the
others to do the work involved in getting the good produced so that he
or she can enjoy the benefits of its production for free. Nonetheless, the
game is not a prisoner's dilemma. A prisoner's dilemma is one in which
noncooperation dominates over cooperation. But in this situation, nonco-
operation does not dominate. Although you should refuse to cooperate
if you think that the other two people will do so, you should not refuse -
that is, you should volunteer to pay the cost of draining the meadow-if
you think that only one, and not the other, is willing to volunteer. It is
better for you to do the work to get the meadow drained than to let the
meadow go undrained. And of course you know that every other per-
son's preferences are the same as yours. Like you, they want to try to
"get out of the work," but like you, they also would rather do the work
than see the project abandoned.
This is a three-person, "mixed-motive" or "non-zero sum" game
much discussed in game-theoretic literature. Luce and Raiffa (1957, pp.
90-94, and chapter 6) call it "the Battle-of-the-Sexes" game after their
unfortunately sexist example of a husband and wife who each prefer
different evening activities (he prefers prize fighting and she prefers
ballet) but who would also rather go out with the other to his or her
favorite evening activity than to go to his or her own favorite alone. In
5. In Hampton (1986, p. 151) I present a 3-D matrix representing preferences in a battle-of-
the-sexes game.
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FREE RIDERS AND COLLECTIVE GOODS
253
PERSON X
ACTION A ACTION B
PERSON Y
ACTION
A
ACTION
B
1. 2
3. 3
3, 3
2, 1
FIGURE 4
order to facilitate the discussion of this game, a simplified two-person
version of it is given in the matrix in Figure 4.
This type of interaction problem is still on the coordination side of the
game-theoretic spectrum since coordination of interest predominates and
there is more than one coordination equilibrium (represented by the
upper left and lower right cells) where this notion is stronger than a
Nash equilibrium in that it denotes an outcome in which no one would
be better off if any one player, either himself or another, acted differ-
ently.
6
In this situation the parties are rational to reach an agreement on
their actions so that one of these equilibria will be realized. However, the
relative advantages of the different coordination points introduce con-
flict that might prevent them from coming to an agreement.
I have already hinted that there is another battle-of-the-sexes prob-
lem that can be involved in the production of this type of good. In the
meadow-draining example there appears to be a variety of ways of split-
ting costs such that considerably more than two people-maybe even all
1,000 of them-could participate in the good's production. And although
everyone will believe it is in his or her interest (as well as in the interest
of the group as a whole) to split the cost in some way, there might be
much disagreement among them about the way to split it. So the group
faces a battle-of-the-sexes problem not merely over who will pay the cost
to produce the good but also over how to split those costs in the first
place. (Note that if they decide to split the costs equally among all the
members of the group, there will be no further battle-of-the-sexes prob-
6. This formulation is from David Lewis (1969, p. 14)
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254 JEAN HAMPTON
lem involved in selecting producers, although this outcome is not a
coordination equilibrium and so will not be stable.)
This analysis should illustrate the following point: free-rider problems
have to do with the relationship between the productive units of the good and
individual costs in the community. Battle-of-the-sexes problems occur when
there is no one way to link individuals in the group to productive units
of the step good: either the units are fixed but the number of individuals
who would find it rational to join their fellows in producing these units
is greater than the number of units; or the units are not fixed, in which
case there are a variety of ways in which individual producers can be
linked to the (artificially defined) productive units.
7
The fact that the battle-of-the-sexes game is a type of coordination
game is critical in determining what strategies are effective in solving it. I
have discussed the complicated issues involved in the solution of this
type of game elsewhere (see Hampton, 1986, chapter 6.5.) Suffice it to
say here that the task of the players is to effect coordination on one
coordination equilibrium, where this can be done via explicit agreement
or via the generation of a convention on a "salient" coordination equilib-
rium by the players. The latter "nonagreement" solution to these dilem-
mas requires that the players determine the likelihood that the others
will pursue any of the possible coordination equilibria, and clearly, any
one player's estimation of probabilities here depends in part on what she
7. Without actually presenting this battle-of-the-sexes analysis of free-rider problems in
step good production, the discussion of Frohlich et al. (1975) strongly suggests it. Other
theorists whose discussion of free-rider problems suggests this game include James
Buchanan (1975, p. 37f) and Brian Barry (1982, p. 56). Taylor and Ward also come close
to presenting it, but they mistake the battle-of-the-sexes structure of this situation for
the game of chicken, presented later in Figure 8. There is a big difference between the
game of chicken, which is a game of conflict, and the battle-of-the-sexes dilemma, which
is a type of coordination game with some conflict of interest. The former has only Nash
equilibria, the latter has coordination equilibria; and whereas the former poses the
question, "Do we cooperate?", the latter poses the question, "How do we cooperate?"
Taylor and Ward mistakenly assimilated the two because they defined (what they
called) the "family of chicken games" as games in which it is rational for a player to
attempt a "pre-commitment" strategy, that is, one in which the player binds himself to
his favorite outcome, thereby forcing the other player(s) to pursue that outcome (on
pain of irrationality) also. However, this strategy is advised not only for players in a
chicken game but also for players in a battle-of-the-sexes dilemma, each of whom
should try to bind himself irrevocably to his favorite coordination equilibrium, thereby
forcing the other player(s) to accept it or else lose all chance of realizing a desirable
coordination outcome. It turns out that one cannot define chicken games in terms of a
strategy that those who are in a significantly different game-theoretic situation would
also be rational to follow. Nonetheless, as we shall discuss later, Taylor and Ward are
right to think that some free-rider problems are true chicken games. Our analysis will
show that these chicken games arise not in the context of getting the producers of a
collective good selected, but rather in the context of getting previously selected produc-
ers of the collective good to perform.
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FREE RIDERS AND COLLECTIVE GOODS 255
believes the others believe about which coordination equilibria she will
pursue.
This analysis shows that if, in the course of deliberating about being
one of the producers of a step good, I reason in the way that Rawls
describes, "regarding] the collective action of others as already given
one way or the other," then I am reasoning fallaciously. Because this is a
situation calling for coordination, it is what Elster (1979, pp. 18-19, 117-
23) calls a "strategic" situation. Whereas a "parametric" choice situation
is one in which the actor's behavior is the sole variable in a fixed environ-
ment, a strategic situation is one in which an actor's behavior is but one
variable among others, so that his choice must take into account his
expectations of these others' choices even as they must take into account
their expectations of his and others' choices. The choice situation just
described qualifies as strategic because whether others will volunteer to
be the good's producers depends in part upon their expectations of
whether I or other members of the group are willing to do so. In this, as
in any coordination game, each person should make her decisions mind-
ful of her strategic situation, aware that her preferences will have an
effect on the other players, whose preferences will have an effect on
hers. If she reasons "parametrically" (as Rawls essentially suggests), she
is not trying to effect a coordination of all the players' actions; instead
she is treating the rest of the group as a single entity unmindful of her,
believing that their choices are fixed independently of what she will
choose (although she is not sure quite how) such that her choice is the
sole variable in the environment. The analysis in this section shows that
such reasoning is mistaken.
However, a reader might wonder whether a parametric choice in this
situation will be not only justified but also inescapable if the actor does not
have adequate information about what others' expectations and prefer-
ences are and thus has no easy way to coordinate his actions with them.
Whenever such a lack of information exists, feature 3 of Hume's meadow-
draining case does not hold: that is, individual costs and benefits involved
in the good's production are not commonly known. And if there is no way
to persuade someone to provide that information, it is impossible to make
one's choice responsive to others' expectations, so that one must choose
parametrically, using an expected utility calculation in which one tries to
estimate the probability that one is necessary to the production of the
collective step good. There are a variety of ways in which this calculation
might go, but if one's estimate of the probability is sufficiently low, one
will conclude that it is not rational to contribute; and if everyone comes to
this conclusion, the collective good will not be produced.
But this lack of information does not make the battle-of-the-sexes
structure of the situation disappear, as Pettit (1986, pp. 369-70) has
argued; instead, it makes the achievement of coordination in this battle-
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256 JEAN HAMPTON
of-the-sexes situation virtually impossible because there is no way that
the players can develop or come to know of a "salient" coordination
equilibrium at which to aim. This point is important not merely for the
sake of getting the game-theoretic structure of the situation right, but
also for the sake of understanding how to solve it. Whereas people fail to
cooperate in a prisoner's dilemma because it is individually irrational to
do so, in the situation just described people fail to cooperate because
there is a dearth of information enabling them to coordinate on a coopera-
tive outcome. If that information is supplied, cooperation is possible.
The "economic geometry" of the situation is different, so that the prob-
lems preventing cooperation, as well as the remedies that will effect it,
differ in the two cases.
Indeed, the fact that we are not dealing with a prisoner's dilemma
can explain why it is possible to credit the success of (what appear to be)
latent groups in providing collective goods to the work of "political
entrepreneurs." These are people willing to pay the cost of providing the
information necessary to produce public goods because they perceive
that this activity will pay off for them individually in a big way; e.g., it
might enhance their careers or increase their power. But political entre-
preneurs couldn't, for example, organize the building of a bridge if
people really were in a prisoner's dilemma situation in which noncoop-
eration dominated. That the people face a coordination problem in get-
ting the good produced, only lacking an organizer who can help effect
the coordination by obtaining the needed information, is something that
his organizational activity presupposes.
Estimates of how often lack of information will attend the produc-
tion of step goods are hard to make from a philosopher's armchair.
Economists and other social scientists are in a better position to make
these estimates than I am. But one wonders whether, even if the prob-
lem were common, political entrepreneurs would frequently be available
(or recruitable, if the group had the resources to pay them in some way)
8
to help resolve it, paving the way for voluntary cooperation.
Feature 3 also does not hold when information about the cost of
producing the step good is lacking. In this sort of situation, it would be
reasonable for the group to make an estimate of the cost, and then
proceed to try to find producers to pay it such that the good will be
produced. But if I am deciding whether or not to be a producer, I will
note that as long as the other producers pay their share of the estimated
cost, my contribution might not be necessary: if the estimate is wrong,
then either it is too high, in which case the good will be produced by the
others without my contribution, or the estimate is too low, in which case
8. Frohlich et al. (1970, p. 119) suggests that groups may find it rational to subsidize
voluntarily the pay of political entrepreneurs.
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FREE RIDERS AND COLLECTIVE GOODS 257
the good will not be produced even if I do contribute. Of course, the
better the estimate and the higher my stakes in getting the good pro-
duced, the more likely an expected-utility calculation will dictate that I
produce. But when the estimate of the good's cost is poor, and/or when
one's stakes in getting it produced are low, an expected-utility calcula-
tion will likely dictate against production. Perhaps the group might have
certain devices available to them that could remedy this situation; for
example, they might deliberately overestimate costs but then allow some
individuals whose contributions prove to be unnecessary to retrieve
them. But if such remedies are not possible, then the group is once again
faced with a situation which, although still a battle-of-the-sexes problem, is
very difficult to solve cooperatively.
Finally, feature 3 doesn't hold if the step goods are themselves vague,
in the way that, for example, a "heap" of stones is vague. Such vague-
ness in the definition of these goods encourages people to reason in a
way that has been associated with what is called the "Sorites" paradox.
9
Each possible contributor may reason, "My contribution to the heap is
unnecessary; either the pile that exists already qualifies as a heap, in
which case my stone doesn't contribute anything to the heap's produc-
tion; or the pile is not a heap, in which case my adding one stone to it
won't suddenly cause it to be a heap, meaning that, once again, my
stone doesn't contribute anything to the heap's production." Note that
this reasoning will be duplicated no matter what the estimate of stones
needed to produce the heap. In this situation, each member of the group
will believe she faces not a single prisoner's dilemma but what I will call
an "ordered game set" of prisoner's dilemmas. For any estimate of what
is necessary to produce the good by some number K + 1 producers
where K ranges from 0 to n - 1 (assuming there are n members of the
group), then Figure 5 shows how an individual will reason when deter-
mining whether or not to join with K other producers to pay her share of
the estimated cost. Here it appears rational, no matter what the others
do, for her not to produce her share of the estimated cost. But Sorites-
like reasoning is supposed to be a mistake, so that the situation ought to
have a battle-of-the-sexes structure. There are, thus far, no uncon-
troversial proofs showing how it is fallacious, although even were one to
be given, it still seems to be the kind of (fallacious) reasoning that people
would find tempting, to the detriment of the group.
Let me conclude this discussion of producer-selection problems in
step good production by varying features 4 and 5 of Hume's example in
order to see how the production of the step good is affected.
9. See Tuck (1979, p. 152), who cites Crispin Wright's argument (1976, pp. 223 and 247)
that this paradox arises out of the vagueness of our criteria for defining certain entities,
such as "heaps."
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258 JEAN HAMPTON
THE COLLECTIVE
PRODUCE NOT PRODUCE
THE
INDIVIDUAL
PRODUCE
NOT
PRODUCE
2
1
4
3
FIGURE 5
Theorists have generally thought that if feature 4 doesn't hold and
the group charged with producing a collective good is privileged rather
than latent, there is no collective action problem in the production of the
good. But this isn't true. Privileged groups can also face a battle-of-the-
sexes problem in their attempts to produce a collective good if there is
more than one person for whom the value to her as an individual is
greater than the total cost. In this case, the group must determine which
of these individuals will produce the good, or else work out a way for
them to share the production costs. Clearly it is in the interest of these
individuals to try to escape paying for the good unless doing so would
jeopardize its production. Theorists have tended to overlook the fact that
this kind of free-rider problem can exist in privileged groups because
they have concentrated only on problems involved in getting people to
pay the costs of production, rather than on problems involved in selecting
people to pay those costs. A privileged group will produce a collective
good only if it solves the selection problem.
Finally, suppose we change feature 5 of Hume's meadow draining
case-the feature that costs can be split in a variety of ways among more
than one individual. If production units of a good are fixed and uniquely
assignable to members, then there is no battle-of-the-sexes problem asso-
ciated with the selection of the good's producers; indeed, there is no free-
rider selection problem at all in this situation. Assuming that it is common
knowledge that only these members can produce the good by paying
only these units, they are rational to volunteer to produce it, because
they know it will not get produced unless they do so, and they know
that they are better off by paying their share of the cost of production
and producing the good than they are by not paying the cost and living
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FREE RIDERS AND COLLECTIVE GOODS 259
PERSON A
PRODUCE DON'T PRODUCE
PERSON B
1.1
2, 2
2. 2
2, 2
PRODUCE
DON'T
PRODUCE
FIGURE 6
without it. Hirshleifer (1983) has suggested that this is actually the way
people perceive their situation in times of disaster: each of them believes
he or she is the "weakest link" in a fragile chain of producers necessary
to prevent a public bad or create a public good.
My analysis in this section has demonstrated that, in general, coordi-
nation problems, rather than conflict problems, attend the selection of
producers of these goods, so that it is not the individually rational pur-
suit of collectively irrational outcomes, but paucity of information's pre-
venting successful coordination, that threatens successful production of
these goods. However, before we can conclude that there are usually no
conflict problems involved in the production of collective goods, we
need to analyze the game-theoretic structure of the situation after indi-
viduals have been chosen to produce the step good.
IV. FREE-RIDER PROBLEMS IN THE PRODUCTION OF STEP
GOODS FOLLOWING THE SELECTION OF PRODUCERS
How we answer the question of what sorts of problems are involved in
producing goods after their producers have been selected depends upon
whether or not production costs are retrievable.
10
In my reconstruction
of Hume's meadow case, they were not; this was feature 6 of that case.
But if feature 6 does not hold and production costs are retrievable, no
further free-rider problem prevents the good's production (see Figure 6).
In this game, the preference for paying is the same as the preference
10. I am told that aspects of the following argument are known in some circles; I do not
know of any place where they have been published.
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260
JEAN HAMPTON
PERSON A
PRODUCE DON'T PRODUCE
PERSON B
PRODUCE
DON'T
PRODUCE
1,1
2. 3
3, 2
2. 2
FIGURE 7
for not paying in the unilateral breach situation because any costs paid
can always be retrieved if the other producer fails to contribute. Thus the
action of paying dominates weakly over the action of not paying.
However, there are interesting free-rider problems in the production
of these goods if feature 6 does not hold and costs are not retrievable.
One such problem is a variant of the assurance problem explored by Sen
(1973, pp. 96-9; 1967, pp. 112-24), presented in the matrix in Figure 7.
This dilemma is a species of coordination problem with two equilibria
(the upper left and lower right cells) in which each player is rational to
cooperate if the other player cooperates, and each is rational not to do so
if the other does not cooperate. Thus, before cooperating each needs to
be assured in some way that the other player will also do so. Insofar as
the players are the designated producers (and insofar as they know that
no one who has not been designated producer will produce the good),
they cannot expect the realization of any of the outcomes represented in
the battle-of-the-sexes matrix in which they do not do the work but the
good is produced anyway. However, each knows that if all of the desig-
nated producers do their share of the work, the good will be produced
(the situation represented by the upper left cell of the matrix in Figure 7),
and each also knows that if some of them don't do their share, then the
good will not be produced and those who have worked to produce the
good will lose their investment without getting any benefit from the
good (because it won't exist-this situation is represented by the lower
left and upper right cells of the matrix). Of course, it is rational for
everyone to work together to produce the good, but how can each pro-
ducer be assured that the others will actually do so?
If, as they produce the good, they can watch one another working,
then each of them can be completely assured that the others are doing
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FREE RIDERS AND COLLECTIVE GOODS 261
their share. But if such scrutiny is not possible, and if they cannot get
information about the extent to which the others are working, should
each of them do his/her share of the production work? Elster (1979, p. 20)
notes that the maximin rule dictates against doing so. But the maximin
rule-if it is ever appropriate-would seem to be inappropriate in those
circumstances in which one is able to estimate the probability that the
others will do their shares. (And the principle of insufficient reason
could be used to estimate probabilities in situations of complete uncer-
tainty.) If the estimate is fairly high, e.g., if there is some way in which
the better coordination point is naturally salient, then it is likely that an
expected-utility calculation will dictate performance for each of them,
and the good will be produced. Moreover, any agreement among them
to do the work required would be a way to make doing the work the
salient action in the circumstances; each would estimate the probability
of the others' doing their tasks as fairly high. [I have argued (Hampton,
1986, chapters 6.2 and 6.5) that this is the most natural way to obtain
assurance in any coordination game,] In any case, it seems that the
producers in this sort of situation would have a good chance of solving
the assurance problem.
However, if there exists what I call a "critical cost point," the produc-
ers face a far more difficult problem. Consider Hume's meadow-draining
example. Suppose the battle-of-the-sexes problem in the selection of
producers were solved, such that you and I are supposed to drain the
meadow, where for each of us V
t
> ViC
T
. Suppose further that each of us
will do so by digging irrigation ditches in the meadow that join together
and eventually drain into a nearby river. (Thus what we pay, i.e., our
labor, is irretrievable.) We both start to work, but after each of us has
done a quarter of the total work (so that half the work remains to be
done) I run off when you are not looking, leaving you alone to do the
rest of the work. Is it rational for you to do it?
Consider that you have paid your contribution, which is equivalent
to V*C
T
and this is a "sunk cost," since you cannot retrieve your time and
effort. So if you quit now, you are without the good and also without
ViC
T
, so that your utility is -ViC
T
. But remember that half the work
remains and that for you V, > V2C
T
. If you continue to work and complete
the project, your utility is V, ViC
T
- ViC
T
, which is clearly greater than
ViC
T
. So you are rational to complete the job.
Thus, for any producer of the good, whenever the remaining cost of
producing a good can be split between all the other producers in the
group such that, for those other players, their benefit from the good
exceeds their share of the remaining cost, then that individual producer
is rational to cease work. This calculation dictates nonperformance at
what I call the critical cost point: that is, the point at which it is rational for
only some of the selected producers of the good to pay the whole remain-
ing cost.
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262
JEAN HAMPTON
PERSON A
PRODUCE DON'T PRODUCE
PERSON B
PRODUCE
DON'T
PRODUCE
2, 2
1, 3
3, 1
4, 4
FIGURE 8
If this critical cost point has been reached (and note that it might be
reached before anyone has paid any cost), what is the structure of the
game-theoretic situation faced by the producers? In a two-player game,
the matrix in Figure 8 describes the situation (e.g., in the meadow-
draining example) and as we see, it depicts the game of chicken.
In this game there is no dominant action, which makes it impor-
tantly different from a prisoner's dilemma; nor are there any coordina-
tion equilibria, so that unlike the battle-of-the-sexes dilemma, it is not a
coordination game. Each player prefers the situation in which he is the
person reneged upon by the other, to the situation in which both renege,
whereas in a prisoner's dilemma, the latter is preferred to the former. So
in this game, if I believe you will pay the remaining share of the cost of
production, I am rational to renege, but if I believe you will not do so, I
should pay either the entire remaining share or, as long as you continue
to put in your original share of the total cost involved, only the remain-
ing cost of my original share of the total cost. Indeed, in this sort of
game, if we each distrust the other, the result will be that we will both do
the work required to get the good produced.
In any case, because there is no dominant action in this sort of game,
what is rational for either of us to do can depend upon a wealth of
contingencies. And as Taylor and Ward discuss (1982, pp. 354ff), we are
certainly well advised to try a precommitment strategy to force the oth-
ers) to cooperate while escaping that fate ourselves. So, in this kind of
situation each is trying to be a free rider, not in the sense that he is trying
to get out of being selected to be a producer, but in the sense that, as
someone who has already been selected, he is trying to get out of doing
some (or maybe even all) production work. Moreover, he is not (as in a
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FREE RIDERS AND COLLECTIVE GOODS 263
battle-of-the-sexes game) merely trying to score a "win" over the others
in the group, who will still "win" themselves as producers insofar as the
benefits they will get from the good exceed the cost to them of their
work; instead he is trying to score a win over others in the group who
will actually lose if he wins, insofar as they will end up by paying more for
the good produced than the benefit they will receive from it.
Note, however, that an individual's succeeding in being a free rider in
this second sense, thereby scoring a win in the chicken game, is not bad for
the collective. Of course it is bad for the loser, but the collective will still get
the good it desires. We have actually discovered a free-rider problem
which poses more difficulties for individuals than it does for groups!
Nonetheless, the group will find it difficult to produce this sort of
step good if individuals realize before the producers are selected, that as
producers they run the risk of being exploited in this way. The possibil-
ity of exploitation changes the game-theoretic structure of the situation
from a battle-of-the-sexes coordination game to a prisoner's dilemma.
Each knows that if he contributes to the good's production, he stands a
high chance of being exploited by the others and paying more for the
good than he will receive from it; and he also knows that if he does not
pay anything for the good, either he will get the good for free or he will
at least not lose anything. Hence, no matter what the others do, it is
rational for this individual not to produce, since this action is both the
best defensive strategy and the best way to take advantage of an exploit-
ative opportunity. Every other individual's preferences will be symmet-
ric with his, so that no one will find it rational to produce the good.
11
What can members of a group do to change the structure of the
situation so that they can get the good produced?
1. The group can take steps to make production costs retrievable. If,
for example, paying the cost involves contributing money, the group can
make each producer pay into some kind of escrow account, such that
unless all the producers pay, the good will not be produced and the
individual's share of the cost will be returned. This strategy makes it
impossible for anyone to be an exploiter. (Note also that this strategy
solves any assurance problem involved in the good's production; I know
that I will pay to produce the good only when all the other producers
necessary to its production pay their share.)
2. Where retrievability isn't possible the group can try to destroy the
critical cost point. For example, they can use any time deadline for the
good's completion in the situation to accomplish this result. If the pro-
ducers start work at a point where each of them has just enough time to
11. In fact, this is what Pettit (1986) calls a "foul dealer" variant of a multiperson PD game,
because a lone defector makes one or more cooperators worse off than they would
have been had everyone defected.
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264 JEAN HAMPTON
complete his or her individual share of the productive efforts before the
deadline for the good's production but no time to take on anyone else's
share, then no one will be able to exploit the other workers: if one of
them ceases work, the others will not be able to take on this work and
complete the good's production before the deadline. So, because a re-
neger can gain nothing by his reneging action (indeed, he suffers a net
loss equivalent to the work he invested), each producer is rational, as
long as he or she can be reasonably assured of the others' performance,
to work.
3. Selective incentives can be introduced to make the exploitative
option irrational.
However, the fact that the first two strategies can be used in a wide
variety of circumstances means that many step goods can be made to be (if
they are not already) goods whose production poses only coordination
problems (assurance and/or battle-of-the-sexes dilemmas) to the group.
And these are problems which it is quite possible to solve (if information
and mechanisms for coordination exist) without the help of the state.
V. THE GAME-THEORETIC STRUCTURE UNDERLYING THE
PRODUCTION OF INCREMENTAL GOODS
What about the production of incremental goods? Surely PD games
necessarily attend their production, so that the introduction of sanctions
will be required to get them produced at optimal levels?
To see if this is so, I want to discuss the production of these goods
using a notation that will facilitate precision. A nontechnical summary of
the results follows this discussion.
Let us define an incremental good (G) as follows:
where v is the total number of increments produced and Ag
a
is the ath
increment of the good.
12
To define the cost of production of a certain
amount of incremental good, let C
r
be the total cost of producing a
certain amount of that good. In order to simplify our problem and en-
sure that C
T
is well defined, let us assume that the cost of producing any
part of C
T
is the same for any individual
13
(e.g., suppose, as econo-
12. Recall that in the case of a continuous public good the definition would go as follows:
G(c) = I dg(c').
13. In the real world, the cost of producing Ag would likely vary depending upon which
individual was asked to produce it, but we ignore this complication here by assuming
that the cost of producing any increment is the same for any individual. However,
note that we are not assuming that producing each increment of the good costs the
same amount.
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FREE RIDERS AND COLLECTIVE GOODS 265
mists standardly do, that producing the good can be computed in
money, that the monetary cost of producing any part of the good is the
same for each individual in the group, and that individual utilities are
roughly proportional to amounts of money). We can define C
r
as 2 C,
(where n is the number of people in the group). However, C
T
can also be
defined as the sum of the costs of each increment of the good produced. In
other words, there is a function relating any Ag to the cost (AC) of
producing that Ag; i.e., f(Ag
a
) = AC". And C
r
can be defined as the sum of
the incremental costs involved in producing a certain amount of the
incremental good. Thus:
where v is the total number of increments produced. This notation al-
lows us to pick out the cost of the ath increment of the good produced
(which would be AC").
Now the benefit that the individual receives from the production of
an incremental good is defined as a function of the good, i.e.,
/'(O) = V,'
where V," is the individual's benefit received from the good's provision
up to and including v. We must also define the individual's incremental
benefit AV, from some increment of the good as a function of that incre-
ment of the good; i.e.,
f"(Ag) = AV,"
where AV,
a
is the benefit the individual would receive from the ath
increment (only) of the good. Hence, we see that
0=1
where v is the number of increments of the good produced.
Also recall that we have defined the total benefit of the good to the
group (V
T
) as the sum of the benefits to each individual in the group from
the good, i.e.: V
T
= J^V,, where n = the number of individuals in the
group.
Now, what is the precise nature of the problem that might arise in
the production of incremental goods? It is clear that a person is not
rational to contribute if V," > AC
a
, but rather if and only if AV,
a
> AC",
that is, she is rational to contribute only if the increment of benefit that
her contribution would bring to her exceeds the cost to her of providing
this increment.
14
Hence, in a situation where it is always true that AV,
V
<
AC", it is never rational for an individual in this group to contribute to the
good's production.
14. Again, in the continuous case, the question is slightly different: Is dV/dc, 5 0?
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266 JEAN HAMPTON
K OTHERS
PRODUCE DON'T PRODUCE
INDIVIDUAL
PRODUCE
DON'T
PRODUCE
\.
v
- ac
v
- A C
V
0
FIGURE 9
One can present people's problems in this sort of situation as in-
volving a one-shot "ordered-game" set of prisoner's dilemmas-but
only if one clarifies how one's attention can turn from the production
of the good's increments to the productive efforts of others in the group.
Thus far, the individual's calculations have concerned whether or not
to produce the ath increment of a collective incremental good. But if
the ath increment is not the first increment, these calculations assume
that one or more people in the group will cooperate to produce the
previous increments. Suppose the individual assumes that any individ-
ual in the group who contributes to the production of the good will
contribute no more than one increment of that good (her "share"). Each
individual then deliberates about whether she should contribute to the
good's production, where K other people in the group do so by contrib-
uting one increment (so that v = k + 1). Her payoffs (in cardinal
numbers) from the various possible outcomes are represented in the
matrix in Figure 9. But if we assume that AC" > AV,
V
, then V,
v
- AC" <
V""
1
. So the preference orders of the individual for these outcomes are
as follows in Figure 10. These preferences match those of an individual
in a prisoner's dilemma.
Nonetheless, it is a bit misleading to say that this dilemma is a
prisoner's dilemma. It is in fact a set of prisoner's dilemmas. Each individ-
ual must determine for each possible number of fellow contributors (in
the case where each will produce one increment), whether she is rational
to pay the cost of producing the next increment of the good. Hence each
individual engages in not one calculation but a set of calculations, and if,
at every level of the good's production, the cost of the increment she
would provide exceeds the benefit to her from that increment, then she
is rational to conclude that she should not contribute to the good's
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FREE RIDERS AND COLLECTIVE GOODS 267
K OTHERS
PRODUCE DON'T PRODUCE
INDIVIDUAL
PRODUCE
DON'T
PRODUCE
2
1
4
3
FIGURE 10
production, no matter how many other people cooperate to produce any
given level of that good.
It is important to appreciate that the individual must undergo a set of
calculations in this situation in order to appreciate why there can be a very
different, non-PD-type problem involved at some or even all levels of the incre-
mental good's production.
As we have seen, in her set of calculations, an individual must
determine the answers to a series of questions of the form: "What is it
rational for me to do if x number of the group contribute?" (And remem-
ber that her concern for the number of others contributing is simply an
indirect concern for what actually interests her, namely, the number of
increments of the good which will be produced by these individuals.)
Now it might be (as we discussed above), that at every contribution level
the cost of providing an additional increment of the good exceeds the
benefit to her from that increment. But it is also possible that at certain
levels of an incremental good's production (where a certain number of
others in the group cooperate to produce these increments) the incre-
ment of benefit produced for that individual really does exceed the cost
of that increment to her. (Indeed, this may be true at all levels.) The
graphs in Figures 11 and 12 indicate two ways of representing an incre-
mental good whose structure is such that at some levels of the good's
production, the incremental benefit to an individual exceeds her cost of
providing that increment.
15
15. Frohlich et al. (1975) also argue that, given certain production functions of a collective
good, "An individual could be induced to contribute voluntarily without the use of
selecting incentives if he could be persuaded that 'enough' others are contributing" (p.
325). And to make this point they present a number of graphs, one of which (in their
Figure 7) almost exactly duplicates the graph in my Figure 12. However, in their
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line representing AC
f(Ag)
o
r
increments of good (Ag)
FIGURE 11
contribution region
(where V? - AC >
v-l
V,
v
- AC
increments of good (Ag)
FIGURE 12
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FREE RIDERS AND COLLECTIVE GOODS
K-l OTHERS
PRODUCE DON'T PRODUCE
INDIVIDUAL
PRODUCE
DON'T
PRODUCE
269
1
2
4
3
FIGURE 13
If incremental benefit exceeds incremental cost at that level of the
good's production in which K people are contributing to produce v incre-
ments of the good, then at that level V? - AC" > V,
v
~\ and the individu-
al's preference orderings over the possible outcomes are represented by
a different matrix, represented in Figure 13.
This is not a prisoner's dilemma situation; instead the individual is
rational to produce the good with K 1 others. If K = the total number
of possible producers, and/or if only K people (including the individual)
find that V, - AC" > V,
1
""
1
, there will be no battle-of-the-sexes problem
involved in producing the good at this level because there will be no
question about who should do the work nor about whether it will be
rational for enough people to do the work. But if K is some number less
than the total number of possible producers, and if more than K people
find that V,
v
- AC
V
> V,""
1
, then there will be a battle-of-the-sexes prob-
lem involved in determining which of these people will be one of the K
producers of the good.
To summarize in English the argument made thus far: when an
individual is determining whether or not to pay the cost of producing an
incremental collective good, she must determine whether it is rational
for her to produce any particular increment of that good by determining
graphs, the number of contributors, rather than the number of increments of the good,
is represented on the horizontal axis; hence they are not designed to reveal, as my
graphs are, that it is because this good is produced in discrete units that its voluntary
production at certain levels is rational. Their graphs in Figures 5 and 6 (pp. 322, 324)
represent incremental goods whose production functions are different from the one I
present in my Figure 12, but of which it is also true that individuals are rational to
produce them (only) at certain levels.
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270 JEAN HAMPTON
whether the cost to her of doing so is greater than or less than the benefit
to her from that increment. If it is never the case that the cost of supplying
any increment of the good is exceeded by the benefit to her from that
increment, she is irrational to involve herself in the production of that
good, even if she would be better off with the good than without it. But
if there are some levels of the good's production in which the benefit to
her from an increment exceeds the cost to her of providing it, she is
rational to produce it-as long as others find it rational to produce the
good up to the level of that increment, and as long as solutions have
been found for any of the (previously discussed) game-theoretic prob-
lems (e.g., battle-of-the-sexes, assurance, or chicken problems) involved
either in selecting producers for the good or in getting them to produce
that level of the good.
I suspect that the complicated game-theoretic structure underlying
the production of incremental goods has been missed because it is very
easy to believe that the appropriate way of reasoning in these situations
is: "suppose everyone contributes . . . suppose no one contributes" -
assuming, in other words, that the actions of others are given when in
fact they are not. In particular, such reasoning will cause one to miss the
rationality of contributing to the production of a good in which benefit
exceeds cost only at medium levels of the good's production. Sorites-like
reasoning may also mislead one about the good's structure: one can
believe that the increment one will produce will be "imperceptible" and
hence unnecessary. Of course, it would indeed be "imperceptible" in
one sense if the benefit one received from that increment was so small
that the cost of providing it exceeded one's benefit from it, but it is this
latter calculation one should be concerned to perform. Unless one does
so, dismissing the idea of contributing an increment of the good on the
basis of its smallness alone is irrational.
Empirical estimates are needed in order to determine how many
incremental goods do not pose prisoner's dilemmas at all levels of the
good's production. But even if there are a significant number, just be-
cause it is utility-maximizing for individuals to pay the cost of producing
the incremental good at a certain level, doesn't mean that producing this
level of the good is optimal for the group. Hence, the group might still
find it necessary to introduce selective incentives into the situation in
order to get an incremental good produced at optimal levels. So haven't
we finally discovered the area of collective good production which is, as
the traditional analysis suggests, plagued by PD games requiring sanc-
tions for their solution?
Not necessarily; voluntary production at an optimal level of even
these goods is still possible if their increments can be restructured in the right
way. That is, if the group desiring such a good is able to make certain
levels of the production of the good impossible, such that it can only be
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FREE RIDERS AND COLLECTIVE GOODS 271
produced in one or more large "steps," the production of the good at an
optimal level might pose only a battle-of-the-sexes problem. Suppose,
for example, that a security service approached a neighborhood haunted
by frequent burglaries and offered to provide patrol service for the neigh-
borhood, with the number of hours of the patrol per week depending
upon the number of households paying for the patrol. If the security
service offered to make the number of hours strictly dependent upon the
number of households contributing (for example, each new contributing
household might pay for two more hours of patrol per week), the neigh-
borhood would be asked to produce an incremental collective good and
each household might find it individually rational not to pay for its two-
hour increment of patrol no matter how many other households did so
(i.e., each household might find itself facing a coordinated set of prison-
er's dilemmas). But suppose the security service said that it would, at a
minimum, provide patrol for half of the hours (50%) of the week as long
as it got 40% of the households contributing, but that if less than 40%
contributed it would provide no hours of patrol (and any contributions
made would be returned to these households). In this second offer, the
security service has made an incremental good into a good with at least
one large step, and residents of the neighborhood would now have to
determine whether they would be better off paying a certain share of the
cost of producing this large step than they would be if they refrained
from doing so. Suppose that the security service asked each of the house-
holds making up the 40% to pay for the equivalent of one hour of the
half-week patrol. Each household would then calculate whether or not it
was rational to pay for this hour-its share of the cost of this half-week
patrol -by determining whether or not the cost of doing so was exceeded
by the benefit to it of the half-week patrol. In other words, instead of
comparing the cost of providing an increment of security with the benefit it
would get from that increment, each household would now compare its
share of the cost of providing 50% of the incremental good, with the benefit it
would get from 50% of the incremental good. And while contributing on the
basis of the first comparison is likely to be irrational, contributing on the
basis of the second comparison could well be rational. So, by transform-
ing the situation into the production of a good that has a very large initial
step, the security service has ensured that only the (primarily coordina-
tion) problems involved in step good production will be involved here.
16
Recall at the outset that I said the distinction between incremental
goods and step goods was not sharp. The last example illustrates this
point. Those collective goods that come in more than one increment can
16. Although they do not explicitly pursue this restructuring idea, Frohlich and Oppen-
heimer (1978) suggest it when they insist that "successful political action based solely
on the individual's incentives to obtain the collectively supplied good requires mar-
ginal cost sharing" (p. 63).
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272 JEAN S. HAMPTON
be more or less "steppy"; in particular, the increments involved in their
production can be large or small (even infinitesimally small). Moreover,
as the example above illustrates, a good that might naturally be thought
to come in small increments can be "restructured" such that it can only
be produced in increments that have been made (artificially, by the
group's reconstruction) quite large. This restructuring is desirable be-
cause the larger the increment, the more likely a group can respond to its
production in the way they would respond to a pure step good-splitting
the cost of producing the (large) increment of the good such that the split
cost for a member of the group will be exceeded by the benefit to that
member from the entire increment.
VI. CONCLUSION
In this article, I have argued that the production of many collective goods
involves only coordination problems, and that the production of other
collective goods involves conflict problems that can be transformed-
without the use of sanctions-into coordination problems. I have also
suggested a variety of strategies for the voluntary solution of these coordi-
nation problems by self-interested people. Estimates of how often these
strategies are available must be made by others; complicating this task is
the fact that I have had to make a number of simplifying assumptions that
do not fit with a messier reality. Nonetheless, this analysis should be good
news to those who-for practical or theoretical reasons-want to believe
that many collective goods can be produced without the help of the state.
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