infonet-economy

Contests between groups are prone to intra-group externalities (free-riding). Yet,
costless incentive schemes that entirely avoid free-riding within a group might be undesirable, both individually and socially. In contests between two groups, a relatively weak (i.e., small or unproductive) group will optimally not implement them
because they compound differences in strength between groups. If the groups are of
relatively similar strengths, they are both worse off when they rein in their intra-group
externalities compared to a situation where they do not. If groups' strengths differ
sufficiently, the relatively strong group benefits at the expense of the relatively weak
one.