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Starting small toward voluntary formation of efficient large groups in public goods provision

Gary Charness and Chun-Lei Yang

Journal of Economic Behavior & Organization, 2014, vol. 102, issue C, 119-132

Abstract: We test a mechanism whereby groups are formed voluntarily, through the use of voting. These groups play a public-goods game, where efficiency increases with group size (up to a limit, in one treatment). It is feasible to exclude group members, to exit one's group, or to form larger groups through mergers involving the consent of both merging groups. We find a great degree of success for this mechanism, as the average contribution rate is very high. The driving force appears to be the economies of scale combined with the awareness that bad behavior will result in exclusion or no admission. However, an important additional component is that it is possible for previous outsiders to later redeem themselves by becoming high contributors, typically in efficient large groups.

Keywords: Economies of scale; Exclusion; Exit; Experiment; Merger; Public goods; Redemption; Social efficiency; Voluntary group formation; Voting (search for similar items in EconPapers)
JEL-codes: A13 B49 C79 C91 C92 D71 H41 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (66)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:102:y:2014:i:c:p:119-132

DOI: 10.1016/j.jebo.2014.03.005

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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