The 'Hold-up' Problem with Political Entrepreneurship for Collective Action : An Incomplete-Contract Approach to Collective Goods

The organizing work is a prerequisite for any collective action, but it must be undertaken with a fear of being 'held - up' due to its relation-specific and non-verifiable nature. If compensation for that work is not assured, the incentive for that work is lost. By examining a three-stage game model to illustrate the whole process of providing a collective good, I derive the results (i) that the possibility of collective action depends on whether or not political entrepreneurs can solve the 'hold-up' problem with leadership for collective action, and (ii) that a group optimality can be attained under the leadership of a financially-independent type of political entrepreneur under the condition of costless re-negotiation.