Fairness and Inequality in Institution Formation

67 Pages Posted: 21 Sep 2023

See all articles by Julian Detemple

Julian Detemple

Goethe University Frankfurt

Michael Kosfeld

Goethe University Frankfurt; IZA Institute of Labor Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); University of Bonn - Center for Development Research (ZEF)

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Date Written: August 24, 2023

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

JEL Classification: C92, D02, D63, H41

Suggested Citation

Detemple, Julian and Kosfeld, Michael, Fairness and Inequality in Institution Formation (August 24, 2023). SAFE Working Paper No. 402, Available at SSRN: https://ssrn.com/abstract=4578834 or http://dx.doi.org/10.2139/ssrn.4578834

Julian Detemple

Goethe University Frankfurt

Michael Kosfeld (Contact Author)

Goethe University Frankfurt ( email )

Faculty of Economics and Business Administration
Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bonn - Center for Development Research (ZEF) ( email )

Walter-Flex-Str. 3
Bonn, NRW 53113
Germany

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