IDEAS home Printed from https://ideas.repec.org/p/cdl/ucsbec/qt0hx472pn.html
   My bibliography  Save this paper

Endogenous Group Formation and Public Goods Provision: Exclusion, Exit, Mergers, and Redemption

Author

Listed:
  • Charness, Gary B
  • Yang, Chun-Lei

Abstract

We test a mechanism whereby groups are formed endogenously, through the use of voting. Once formed, groups play a public-goods game, where there are economies of scale: in two treatments the social value of an incremental contribution to the group account increases with the size of the group, but in the second treatment, the social value is capped once a certain group size is reached. Societies of nine people are initially formed randomly into three groups of three people who play the game for three periods. Individuals then learn about the average contribution of each individual (by ID number) in one’s current own group, as well as the average contribution in other groups, and can decide whether to exit the group. Remaining group members choose whether to exclude any current members from the group; the new groups and ‘free agents’ then choose whether to merge with other existing groups and/or other free agents. We find a great degree of success for this mechanism. The average contribution rate is quite high in both treatments, but is modestly (albeit significantly) higher in the first treatment, when there is no cap on the social value of a contribution. In the first treatment, we see large and stable groups forming, but we see considerably more instability and smaller group sizes in the second treatment. The driving force appears to be the economies of scale combined with the awareness that bad behavior will result in ostracism, but in the Athenian sense of possible redemption. This redemption is a unique feature of our environment, with about one-third of the population becoming good citizens after initially being low contributors.

Suggested Citation

  • Charness, Gary B & Yang, Chun-Lei, 2008. "Endogenous Group Formation and Public Goods Provision: Exclusion, Exit, Mergers, and Redemption," University of California at Santa Barbara, Economics Working Paper Series qt0hx472pn, Department of Economics, UC Santa Barbara.
  • Handle: RePEc:cdl:ucsbec:qt0hx472pn
    as

    Download full text from publisher

    File URL: http://www.escholarship.org/uc/item/0hx472pn.pdf;origin=repeccitec
    Download Restriction: no

    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416-416.
    2. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 817-869.
    3. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    4. David Masclet & Charles Noussair & Steven Tucker & Marie-Claire Villeval, 2003. "Monetary and Nonmonetary Punishment in the Voluntary Contributions Mechanism," American Economic Review, American Economic Association, vol. 93(1), pages 366-380, March.
    5. Urs Fischbacher & Simon G�chter, 2005. "Heterogeneous social preferences and the dynamics of free riding in public goods," IEW - Working Papers 261, Institute for Empirical Research in Economics - University of Zurich.
    6. Roberto A. Weber, 2006. "Managing Growth to Achieve Efficient Coordination in Large Groups," American Economic Review, American Economic Association, vol. 96(1), pages 114-126, March.
    7. Ernst Fehr & Alexander Klein & Klaus M Schmidt, 2007. "Fairness and Contract Design," Econometrica, Econometric Society, vol. 75(1), pages 121-154, January.
    8. Cinyabuguma, Matthias & Page, Talbot & Putterman, Louis, 2005. "Cooperation under the threat of expulsion in a public goods experiment," Journal of Public Economics, Elsevier, vol. 89(8), pages 1421-1435, August.
    9. Talbot Page & Louis Putterman & Bulent Unel, 2005. "Voluntary Association in Public Goods Experiments: Reciprocity, Mimicry and Efficiency," Economic Journal, Royal Economic Society, vol. 115(506), pages 1032-1053, October.
    10. Ernst Fehr & Bettina Rockenbach, 2003. "Detrimental effects of sanctions on human altruism," Microeconomics 0305007, EconWPA.
    11. Theodore C. Bergstrom, 2002. "Evolution of Social Behavior: Individual and Group Selection," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 67-88, Spring.
    12. Andreoni, James & Samuelson, Larry, 2006. "Building rational cooperation," Journal of Economic Theory, Elsevier, vol. 127(1), pages 117-154, March.
    13. Giorgio Coricelli & Dietmar Fehr & Gerlinde Fellner, 2004. "Partner Selection in Public Goods Experiments," Journal of Conflict Resolution, Peace Science Society (International), vol. 48(3), pages 356-378, June.
    14. Gunnthorsdottir, Anna & Houser, Daniel & McCabe, Kevin, 2007. "Disposition, history and contributions in public goods experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 304-315, February.
    15. T. K. Ahn & R. Mark Isaac & Timothy C. Salmon, 2008. "Endogenous Group Formation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(2), pages 171-194, April.
    16. Ehrhart, Karl-Martin & Keser, Claudia, 1999. "Mobility and cooperation: on the run," Sonderforschungsbereich 504 Publications 99-69, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    17. Maier-Rigaud, Frank P. & Martinsson, Peter & Staffiero, Gianandrea, 2010. "Ostracism and the provision of a public good: experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 73(3), pages 387-395, March.
    18. Alison Evans Cuellar & Larkin S. McReynolds & Gail A. Wasserman, 2006. "A cure for crime: Can mental health treatment diversion reduce crime among youth?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 25(1), pages 197-214.
    19. Karl-Martin Ehrhart & Claudia Keser, 1999. "Mobility and Cooperation: On the Run," CIRANO Working Papers 99s-24, CIRANO.
    20. Sethi, Rajiv & Somanathan, E., 2003. "Understanding reciprocity," Journal of Economic Behavior & Organization, Elsevier, vol. 50(1), pages 1-27, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gürerk, Özgür & Irlenbusch, Bernd & Rockenbach, Bettina, 2014. "On cooperation in open communities," Journal of Public Economics, Elsevier, vol. 120(C), pages 220-230.
    2. repec:eee:gamebe:v:105:y:2017:i:c:p:276-296 is not listed on IDEAS
    3. List, John A. & Rasul, Imran, 2011. "Field Experiments in Labor Economics," Handbook of Labor Economics, Elsevier.
    4. Nax, Heinrich H. & Balietti, Stefano & Murphy, Ryan O. & Helbing, Dirk, 2015. "Meritocratic matching can dissolve the efficiency-equality tradeoff: the case of voluntary contributions," LSE Research Online Documents on Economics 65443, London School of Economics and Political Science, LSE Library.
    5. repec:gam:jgames:v:8:y:2017:i:4:p:50-:d:119204 is not listed on IDEAS
    6. Nax, Heinrich H. & Murphy, Ryan O. & Helbing, Dirk, 2014. "Stability and welfare of 'merit-based' group-matching mechanisms in voluntary contribution game," LSE Research Online Documents on Economics 65444, London School of Economics and Political Science, LSE Library.
    7. Gürerk, Özgür & Irlenbusch, Bernd & Rockenbach, Bettina, 2009. "Voting with Feet: Community Choice in Social Dilemmas," IZA Discussion Papers 4643, Institute for the Study of Labor (IZA).
    8. Charness, Gary & Yang, Chun-Lei, 2014. "Starting small toward voluntary formation of efficient large groups in public goods provision," Journal of Economic Behavior & Organization, Elsevier, vol. 102(C), pages 119-132.
    9. Claudia Keser & Claude Montmarquette, 2011. "Voluntary versus Enforced Team Effort," Games, MDPI, Open Access Journal, vol. 2(3), pages 1-25, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:ucsbec:qt0hx472pn. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff). General contact details of provider: http://edirc.repec.org/data/educsus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.