Community dynamics in the lab

This paper studies the dynamics of community formation when members differ substantially in their returns from voluntary local public good provision. Laboratory experiments are conducted to examine how agents relocate in response to both community provision and membership composition, as well as how the growth and stability of communities are dictated by moving costs and crowding. When the public good is congestible, such that returns are lower for larger populations, I find communities are characterized by instability, cyclical fluctuations in local provision, and a dynamic in which low demanders continually chase high demanders through locations. When congestion is eliminated, subjects with different returns do sometimes co-exist. Yet chronic, inefficient movement persists, suggesting that instability is driven by intrinsic preferences for community composition, as well as by sensitivity to congestion.