Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82110
Authors: 
Berglöf, Erik
Burkart, Mike
Friebel, Guido
Paltseva, Elena
Year of Publication: 
2009
Series/Report no.: 
EPRU Working Paper Series 2009-07
Abstract: 
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.
Subjects: 
organizations
club good
voting rules
EU integration
JEL: 
D2
D7
P4
Document Type: 
Working Paper

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