Industry Associations Can Be Self-enforcing Agreements With Individual Heterogeneity

Under the analytic framework of inherent regulation, the paper focuses on the self-enforcing agreement between the members of business association and the association itself, in which case the Tragedy of the Commons can be avoided. If the association's services aren't produced directly by association members themselves, the decision-making of prospective members is affected by three factors that are dues, exit fee and uncertainty of service. On the other hand, in the association that the members directly produce services themselves, the heterogeneous game can carry out the Pareto equilibrium if we give up the hypothesis that all of the members are always rational. There exist some empirical facts to support the analysis above.