Working Paper: CEPR ID: DP18473
Authors: Julian Detemple; Michael Kosfeld
Abstract: A key solution for public good provision is the voluntary formation of institutions that commit players to cooperate. Such institutions generate inequality if some players decide not to participate but cannot be excluded from cooperation benefits. Prior research with small groups emphasizes the role of fairness concerns with positive effects on cooperation. We show that effects do not generalize to larger groups: if group size increases, groups are less willing to form institutions generating inequality. In contrast to smaller groups, however, this does not increase the number of participating players, thereby limiting the positive impact of institution formation on cooperation.
Keywords: institution formation; group size; social dilemma; social preferences
JEL Codes: C92; D02; D63; H41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| group size (C92) | probability of implementing institutions smaller than the grand institution (D02) |
| group size (C92) | preference for grand institutions (D02) |
| social preferences (D71) | voting behavior against institutions involving inequality (D72) |
| group size (C92) | efficiency of institution implementation (D02) |