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

  • 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)

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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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
Contact details of provider: 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
Web page:

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  1. George A. Akerlof & Rachel E. Kranton, 2000. "Economics And Identity," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 715-753, August.
  2. Itoh, Hideshi, 1991. "Incentives to Help in Multi-agent Situations," Econometrica, Econometric Society, vol. 59(3), pages 611-36, May.
  3. Fehr, Ernst & Falk, Armin, 2002. "Psychological Foundations of Incentives," IZA Discussion Papers 507, Institute for the Study of Labor (IZA).
  4. 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.
  5. Ernst Fehr & Urs Fischbacher, 2004. "Third-party punishment and social norms," Experimental 0409002, EconWPA.
  6. 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.
  7. B�rd Harstad, 2005. "Majority Rules and Incentives," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1535-1568, November.
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