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Cooperate and Conquer∗

The idea that cooperation can be a source of power has been extensively discussed in various disciplines. We study this idea from an economic viewpoint by analyzing the effect of intragroup cooperation in a static group rent-seeking model. Intragroup cooperation means that agents’ rent-seeking efforts maximize their group’s expected payoff. Although intragroup cooperation always reduces average welfare in the economy, it significantly increases the winning probabilities and expected payoffs of the cooperative group. Our basic model reveals that this advantage is proportional to group sizes. We study which contexts (technologies, preferences) tend to amplify or mitigate this advantage.