Endogenous Group Formation via Unproductive Costs

Jason Aimone, Laurence R. Iannaccone, Michael Makowsky and Jared Rubin

The Review of Economic Studies, 2013, vol. 80, issue 4, 1215-1236

Abstract: Sacrifice is widely believed to enhance cooperation in churches, communes, gangs, clans, military units, and many other groups. We find that sacrifice can also work in the lab, apart from special ideologies, identities, or interactions. Our subjects play a modified VCM game--one in which they can voluntarily join groups that provide reduced rates of return on private investment. This leads to both endogenous sorting (because free-riders tend to reject the reduced-rate option) and substitution (because reduced private productivity favours increased club involvement). Seemingly unproductive costs thus serve to screen out free-riders, attract conditional cooperators, boost club production, and increase member welfare. The sacrifice mechanism is simple and particularly useful where monitoring difficulties impede punishment, exclusion, fees, and other more standard solutions. Copyright 2013, Oxford University Press.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (64)

Downloads: (external link)
http://hdl.handle.net/10.1093/restud/rdt017 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Endogenous Group Formation via Unproductive Costs (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:80:y:2013:i:4:p:1215-1236

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().