Journal Files A.A.S

IDENTIFYING PARTIES IN HEC TRANSACTIONS

Institutional economics theory makes the transaction as the unit of observation and thus it is important to clearly identify the interdependent parties to the transaction. Note that this extends beyond the usual buyer-seller relationship.

1. Free-rider-- uses HEC good without paying.

1a. Unwitting free-rider-- uses HEC good without paying, but has not guile; just thinks that her action can't make a difference.

1b. Free-rider with guile-- calculatingly opportunistic with guile. A.K.A. "Gambling Free-rider."

2. Frustrated would-be rider-- This is the person who thinks that the good is worth her share of the cost, but gets no good if there are too many free-riders. The free-riders have stolen the horse. This is the case of the missing product.

Olson defines a "latent group" as containing individuals who "cannot make a noticeable contribution to any group effort, and since no one in the group will react if he makes no contribution, he has no incentive to contribute." "Large or "latent" groups have no incentive to act to obtain a collective good because, however valuable the collective good might be to the group as a whole, it does not offer the individual any incentive to pay dues ...." (p.50)

3. Joy-rider-- Person who values the game (ride) participation and relationship with others independently of the instrumental and substantive outcome. These people are part of a status transaction with others. They pay because it is the right thing to do or just from habit. Right thing to do is what Sen called "Commitment."

4. Privileged group-- "Each of its members, or at least some one of them, has an incentive to see that the collective good is provided, even if he has to bear the full burden of providing it himself." (Olson, p. 50) He might have added... if they do not worry about fairness and have no malevolence toward free-riders.

Olson further adds "Intermediate Groups" "in which no single member gets a share of the benefit sufficient to give him an incentive to provide the good himself, but which does not have so many members that no one member will notice whether any other member is or is not helping to provide the collective good." He notes that the success of this group depends on "group coordination or organization." This might include social pressure.

4. Unwilling-rider-- Someone who in the situation of HEC and the structure of administration or tie-in market sales must pay for something they do not want (willingness to pay is less than the price). (Note: do not use this technical term for the losers in other situations.)



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