Abstract: We examine the question of how collective action is best organized. Adopting a comparative institutional approach, we contend that the organization of collective action will incur transaction costs of discovery, bounding, adoption, enforcement, and probity, and discuss the antecedents of these costs. We then consider the relative efficacy of alternate institutional arrangements in minimizing these costs, arguing that discovery costs are lowest under for-profits, probity costs under non-profits, adoption costs under collectives, and bounding and enforcement costs under the state. These arguments are used to develop a theoretical framework defining the optimal governance arrangement for a given collective action situation. Our study thus extends institutional economics theory to the governance of collective action, and has implications for both social welfare and the non-market strategies of firms.

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