In his book, the Logic of Collective Action: Public Goods and the Theory of Groups, Olson (1965) argues that, in a small group composed of heterogeneous members, a member who places the highest value to a pure public good tends to bear a disproportionate share of the burden of providing the good. Olson and Zeckhauser (1966) apply this so-called exploitation hypothesis to an analysis of burden sharing among NATO members, thereby initiating the field of economics of alliances.
The current article provides a short survey of the literature on the field. It contains six primary sections. Following the very brief introductory section, Section 2 reviews Olson and Zeckhauser (1966) and the exploitation hypothesis. The joint product model, which generalizes Olson and Zeckhauser’s pure public good model, is discussed in Section 3. NATO burden sharing in the post-Cold War era is examined in Section 4. The application of the economic theory of alliances on UN peacekeeping is the topic of Section 5. Finally, some concluding remarks are given in Section 6.
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