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

  • Kjell Arne Brekke
  • Karine Nyborg
  • Mari Rege

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. This may result in substantial differences in individual effort level between groups. Our model thus provides one explanation for the existence of group-specific behavioral norms. A principal will prefer exogenous or endogenous group formation depending on whether he prefers high or low levels of the local public good. We analyze two stylized examples: social interaction in schools, and multiple-task teamwork. Copyright The editors of the "Scandinavian Journal of Economics" 2007 .

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 109 (2007)
Issue (Month): 3 (09)
Pages: 531-550

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Handle: RePEc:bla:scandj:v:109:y:2007:i:3:p:531-550
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  1. Ernst Fehr, 2003. "Psychological Foundations of Incentives," Microeconomics 0305010, EconWPA.
  2. B�rd Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1535-1568, November.
  3. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
  4. 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.
  5. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  6. Ernst Fehr & Urs Fischbacher, 2004. "Third-party punishment and social norms," Experimental 0409002, EconWPA.
  7. 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.
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