THE ECONOMIC-THEORY OF ALLIANCES - A SURVEY

This article surveys the development of the economic theory of allianc es over the last quarter of a century since the 1966 article by Olson and Zeckhauser. The pure public good model and the joint product model are presented and then brought up to date. Alternative demand functio ns for military expenditures are indicated. Issues that concern allian ce size, burden sharing, and suboptimality are addressed for the alter native paradigms. Theoretical extensions are reviewed and have involve d the technology of public supply, the security function, alternative cost structures, group allocation processes, and institutional arrange ments. Finally, theoretical developments are briefly related to the la rge empirical literature.