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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)

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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Bibliographic 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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  1. B�rd Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1535-1568, November.
  2. Ernst Fehr & Armin Falk, . "Psychological Foundations of Incentives," IEW - Working Papers 095, Institute for Empirical Research in Economics - University of Zurich.
  3. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
  4. Ernst Fehr & Urs Fischbacher, 2004. "Third-party punishment and social norms," Experimental 0409002, EconWPA.
  5. 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.
  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.
  7. 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.
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