Collective benefits accrue to all stakeholders of the construction sector, regardless of whether they are members of the sro in the building or not. In this case, firms operating in the construction industry, serve as group with special interests. There are two main types of such benefits: – establishment of a favorable regime for the construction industry of government regulation – improving the image of the industry in the eyes of society. Filed under: Center For Responsible Lending. The key issue is the production of collective goods free-rider problem. Protection activities and expression of the collective interests of the business carries sro, respectively, the costs are solely the responsibility of its members, but receive all the benefits. There are several ways to solve ‘the problem of free-rider’.
Firstly, its severity depends on the size, stability and homogeneity of the group: it is less relevant in small groups, where possible control over activities of each and the problem of allocation of costs to achieve the collective interests is resolved by negotiations with relatively low costs of doing. That is, the problem may be relatively easy overcome in oligopolistic industries. The problem will also be less acute if group members are homogeneous, ie belong to the same industry (such as sro in the building), characterized by roughly the same size and famous brand, etc., which ensures convergence of interests. Secondly, you can create electoral incentives for members of the group (positive or negative) that will encourage them to participate in activities to defend their common interests. Private wealth produced by business associations, are as selective incentives.
Third, if for any of the participants gain from the production of the collective good higher costs, such party may assume all the costs of producing the collective good, not paying attention to the fact that benefits from its activities and receive a free rider. In a significant number of cases the collective good more profitable to produce within a business associations do not create public goods, that is, non-SRO in the building. In this case there is a direct savings: Funds obtained through the use of election incentives (the production of private goods), are spent only on the production of collective, rather than public goods (for example, only on lobbying, not on conflict resolution). However, this rule is a major exception: it is possible that the efficient production of collective goods is impossible without the production of the public. This occurs when the terms of society and / or state public goods is a condition to meet the collective interests of business. On the other hand, the sro in the building may well exist without actually producing collective goods, and limited public and private.