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The Fear of Exclusion: Individual Effort when Group Formation is Endogenous

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Author Info
Brekke, Kjell Arne () (Ragnar Frisch Centre for Economic Research)
Nyborg, Karine () (Ragnar Frisch Centre for Economic Research)
Rege, Mari () (Department of Economics, Case Western Reserve University)

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Abstract

To secure their membership in a popular group, individuals may contribute more to the group’s local public good than they would if group formation were exogenous. Those in the most unpopular group do not have this incentive to contribute to their group. Substantial differences in individual efforts levels between groups may be the result. A principal may prefer either exogenous or endogenous group formation, depending on whether an increase in contributions to the local public good coincides with the principal’s interests. We analyze two examples: Social interaction in schools, and multiple-task teamwork.

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File URL: http://www.oekonomi.uio.no/memo/memopdf/memo0905.pdf
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Publisher Info
Paper provided by Oslo University, Department of Economics in its series Memorandum with number 09/2005.

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Length: 23 pages
Date of creation: 21 Apr 2005
Date of revision:
Publication status: Published in Scandinavian Journal of Economics, 2007, pages 531-550.
Handle: RePEc:hhs:osloec:2005_009

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Related research
Keywords: Local public goods; opportunity costs; popularity; multiple-task principalagent analysis.;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
Z13 - Other Special Topics - - Cultural Economics - - - Social Norms and Social Capital; Social Networks Economic Anthropology

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst Fehr & Urs Fischbacher, 2004. "Third-party punishment and social norms," Experimental 0409002, EconWPA. [Downloadable!]
    Other versions:
  2. Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June. [Downloadable!] (restricted)
  4. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June. [Downloadable!] (restricted)
  5. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May. [Downloadable!] (restricted)
  6. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August. [Downloadable!] (restricted)
  7. Bård Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1535-1568, November. [Downloadable!] (restricted)
  8. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn. [Downloadable!] (restricted)
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