The Fear of Exclusion: Individual Effort when Group Formation is Endogenous
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.
|Date of creation:||21 Apr 2005|
|Date of revision:|
|Publication status:||Published in Scandinavian Journal of Economics, 2007, pages 531-550.|
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