What is Collective action problem?
A collective action problem arises when individuals acting in their own self-interest produce an outcome that is worse for everyone. Each person benefits from free-riding on others’ contributions, but if everyone free-rides, the collective good is never produced.
How it works
The tragedy of the commons is the classic example: each herder benefits from adding one more cow to shared pasture, but if all herders do this, the pasture is destroyed. Game theory formalizes this through the prisoner’s dilemma and public goods games, showing that rational individual behavior leads to collectively irrational outcomes.
Applied example
Climate change is a global collective action problem: each country benefits from continued emissions while the costs of climate damage are distributed across all countries, creating an incentive structure where no single country gains enough from cutting emissions to justify the economic cost alone.
Why it matters
Solving collective action problems requires institutional mechanisms (regulation, social norms, tit-for-tat reciprocity, reputation systems) that align individual incentives with collective welfare.
