Company

OPEC

TL;DR

Intergovernmental organization of oil-exporting nations formed in 1960 that demonstrates both coalition power and coalition fragility from defection temptation.

Energy/Oil · Founded 1960

Intergovernmental organization of oil-exporting nations formed in 1960 that demonstrates both coalition power and coalition fragility from defection temptation. OPEC achieved peak coalition power in 1973-1974 when the embargo raised oil prices 4x ($3 to $12 per barrel) with no member defections.

However, OPEC exemplifies 'slow-motion coalition failure' as cheating increased from 8% quota violations (1980s) to 23% (2020s). The key problem: 3-month detection lag for quota violations creates $3.6B in unpunished gain per violation, making defection rational even when punishment is certain. As detection lagged and punishment became too costly (hurts punishers too), the coalition persisted in name but lost enforcement power.

OPEC+ expansion to 23 members in 2016 made detection even harder, demonstrating that larger coalitions face exponentially greater coordination challenges.

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