Growing Groups, Cooperation, and the Rate of Entry

57 Pages Posted: 16 Apr 2014  

Eva Ranehill

University of Gothenburg - Department of Economics

Frédéric Schneider

Yale School of Management

Roberto A. Weber

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 16, 2014

Abstract

We study the stability of voluntary cooperation in response to varying rates at which a group grows. Using a laboratory public-good game with voluntary contributions and economies of scale, we construct a situation in which expanding a group’s size yields potential efficiency gains, but only if the group overcomes the challenge that growth poses for sustained cooperation. We then study the effect on cooperation of exogenously varying rates of entry. Slow growth yields higher cooperation rates and welfare than fast growth, both for incumbents and entrants. This is consistent with slow growth allowing the persistence of optimistic self-reinforcing beliefs. We also study growth rates determined by incumbent group members. While such endogenous growth generally also produces high cooperation levels, growth stalls at intermediate group sizes, leaving potential efficiency gains from growth unrealized.

Keywords: voluntary cooperation, experiment, public good game, endogenous growth

JEL Classification: C920, C720

Suggested Citation

Ranehill, Eva and Schneider, Frédéric and Weber, Roberto A., Growing Groups, Cooperation, and the Rate of Entry (March 16, 2014). CESifo Working Paper Series No. 4719. Available at SSRN: https://ssrn.com/abstract=2425583

Eva Ranehill

University of Gothenburg - Department of Economics ( email )

Vasagatan 1
Gothenburg, 41124
Sweden

Frédéric Schneider

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

HOME PAGE: http://fredericgschneider.com

Roberto A. Weber (Contact Author)

University of Zurich - Department of Economics ( email )

Zuerich, 8006
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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