Technological Determinants of the Group-Size Paradox

The present paper analyzes situations in which groups compete for rents. A major result in the literature has been that there are both cases where larger groups have advantages and cases where they have disadvantages. The paper provides two intuitive criteria which for groups with homogenous valuations of the rent determine whether there are advantages or disadvantages for larger groups. For groups with heterogenous valuations the complementarity of group members’ efforts is shown to play a role as a further factor.