Relationship Between Individual Interests And Collective...

Olson states the purpose of a group is to further the interests of its members. (Olson, 1965; 5) This is not a new idea; Aristotle believes â€Å"men journey together with a view to particular advantage†¦ providing some particular thing needed for the purposes of life, and similarly the political association†¦ for the sake of the general advantages it brings†. (Ethics, VIII.9.1160A) Olson notes particular instances of this, for example, Labour Unions are expected to strive for higher wages and better working conditions. (Olson, 1965; 6) He talks of the relationship between individual interests and collective interests; all the members of a labour union have a common interest in higher wages, but each worker has a unique interest in his personal†¦show more content†¦Each firms’ interest are also contrasting; the more one firms sell, results in a lower the price for the other firms. While each firm has a common interest in a higher price, they have oppo sed interest where output is concerned. In order to illustrate this, Olson makes some assumptions; he assumes price (P) exceeds marginal cost (MC) and that P is inelastic. As P MC, output will increase, and as output increases all firms increase production so price falls. The industry demand curve is inelastic meaning Total Revenue (TR) of the industry will decline. Ultimately, when PMC, output is increased but each firm gets a smaller profit. (Ibid, 9) Alternatively, each firm can increase output to the point that P=MC and so ignore the effects of its extra output on the industry. It can do this because in perfect competition, each firm is so small that it can ignore the effects of output on price. The firm will get only a small part of the benefit from reducing the firm’s output; although the firm is worse off, it has maximised profits. (Ibid, 9) However, if the firms in an industry are maximising profits, the profits for the industry as a whole will reduce. The firms have a common interest in a higher price for the industry’s product yet it is in the interest of each firm that the other firms pay the necessary cost of reduction in output, which is needed to obtain a higher price. (REFERENCE) As no firm wants to do this, outside intervention is the only way ofShow MoreRelatedInterpersonal Communication Essay569 Words   |  3 Pagesis usually because you do not know the context information internally and because cl ose relationships cannot be created in an instant. Low context cultures are fairly easy to enter, even if you are an outsider; the information you need to participate is available, relationships form quicker, and because the most important thing you’re doing here, is to accomplish a task not find your way into a relationship. 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