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

Author

Listed:
  • 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.

Suggested Citation

  • Brekke, Kjell Arne & Nyborg, Karine & Rege, Mari, 2005. "The Fear of Exclusion: Individual Effort when Group Formation is Endogenous," Memorandum 09/2005, Oslo University, Department of Economics.
  • Handle: RePEc:hhs:osloec:2005_009
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    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2005/Memo-09-2005.pdf
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    References listed on IDEAS

    as
    1. Ernst Fehr & Urs Fischbacher, "undated". "Third Party Punishment and Social Norms," IEW - Working Papers 106, Institute for Empirical Research in Economics - University of Zurich.
    2. Fehr, Ernst & Falk, Armin, 2002. "Psychological foundations of incentives," European Economic Review, Elsevier, vol. 46(4-5), pages 687-724, May.
    3. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-636, May.
    4. George A. Akerlof & Rachel E. Kranton, 2000. "Economics and Identity," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 715-753.
    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 464-477, June.
    6. Kjell Arne Brekke & Karine Nyborg & Mari Rege, 2007. "The Fear of Exclusion: Individual Effort when Group Formation is Endogenous," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 531-550, September.
    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.
    8. Bård Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1535-1568.
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    Citations

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    Cited by:

    1. Kjell Arne Brekke & Karine Nyborg & Mari Rege, 2007. "The Fear of Exclusion: Individual Effort when Group Formation is Endogenous," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(3), pages 531-550, September.
    2. 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.
    3. repec:gam:jgames:v:8:y:2017:i:4:p:50-:d:119204 is not listed on IDEAS
    4. 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.
    5. repec:spr:sochwe:v:50:y:2018:i:2:d:10.1007_s00355-017-1081-5 is not listed on IDEAS
    6. Lionel Richefort, 2017. "Warm-Glow Giving in Networks with Multiple Public Goods," Working Papers 2017.32, Fondazione Eni Enrico Mattei.

    More about this item

    Keywords

    Local public goods; opportunity costs; popularity; multiple-task principalagent analysis.;

    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 - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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