Nature of group depend on objective and context

- If firms seek higher price in by restricting output Exclusive Group

- If firms seek support to seek lower taxes/change in government policy Inclusive Group


Exclusive or Market Group
Firms are competitors or rivals
Fixed amount of benefit derived from exclusive collective good
Firms hope to keep number of group firms as low as possible
100 percent participation of group members required
Non collusive members can deprive collusive firms of all benefits
In case unanimous participation required, possibility of holdout

Inclusive or Non Market Groups
Benefit from collective good not fixed in supply
Bargaining or strategic interaction is less common
No desire to eliminate anyone form inclusive group
Any number of firms can join without reducing benefits of others
Non participation does not take away benefits from cooperating firms

Olson describes three general classes of collective action groups
Privileged Group
Has the greatest likelihood for creating collective benefits
Group contains at least one individual who receives a large enough portion of total group benefits to
be willing to bear all of the costs for providing the collective good
Privileged groups tend to be small for three reasons.
Latent Groups
Tend to be large in size
Unable to form and/or sustain the provision of collective benefits
Individuals within a latent group receive a very small portion of the total group benefits, which
produce little direct incentive for an individual to contribute resources towards group activities.
Difficult for group members to identify individuals who do not contribute
large groups typically need formal organizations to coordinate activities and supply collective goods,
increasing the cost of formation and provision.

Intermediate Groups
contain no individual members who receive a large enough portion of the total group benefit to be
willing to bear all of the provision costs but it was possible for members to detect if an individual, or
a subgroup of individuals, alters their contributions
Group coordination is required to supply the collective good, but it is indeterminate if the group
would have the ability to create collective benefits.










First, each individual within a small group
receives a greater portion of the total group benefit relative to those within a large group
increasing the likelihood that at least one individual would be willing to bear all of the provision
costs. Second, it is less expensive to coordinate the activities of a small group. Small groups
may be able to achieve their objectives without creating a formal organization; but if a formal
organization is required, the formation and maintenance costs for a small group would be less
than a large group. And third, it is easier for members in a small group to monitor the actions of
other members and detect changes in contribution levels. This allows the group to use social
incentives to reward collaboration or punish non-collaboration.