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The Fear of Exclusion: Individual Effort when Group Formation is Endogenous

University of Oslo Economics Memorandum No. 09/2005

23 Pages Posted: 15 May 2005  

Kjell Arne Brekke

University of Oslo - Department of Economics; University of Oslo - Frisch Center

Karine Nyborg

University of Oslo - Department of Economics; IZA Institute of Labor Economics

Mari Rege

Case Western Reserve University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2005

Abstract

To secure their membership in a popular group, individuals may contribute more to the group's local public good than they would if group formation were exogenous. Those in the most unpopular group do not have this incentive to contribute to their group. Substantial differences in individual efforts levels between groups may be the result. A principal may prefer either exogenous or endogenous group formation, depending on whether an increase in contributions to the local public good coincides with the principal's interests. We analyze two examples: Social interaction in schools, and multiple-task teamwork.

Keywords: Local public goods, opportunity costs, popularity, multiple-task principal-agent analysis

JEL Classification: C72, D11, D23, L24, Z13

Suggested Citation

Brekke, Kjell Arne and Nyborg, Karine and Rege, Mari, The Fear of Exclusion: Individual Effort when Group Formation is Endogenous (April 2005). University of Oslo Economics Memorandum No. 09/2005. Available at SSRN: https://ssrn.com/abstract=721524 or http://dx.doi.org/10.2139/ssrn.721524

Kjell Arne Brekke

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
Norway
+47 22 84 11 69 (Phone)

University of Oslo - Frisch Center ( email )

Gaustadalleen 21
N-0349 Oslo
Norway
+47 22 95 88 19 (Phone)
+47 22 95 88 25 (Fax)

HOME PAGE: www.frisch.uio.no

Karine Nyborg (Contact Author)

University of Oslo - Department of Economics ( email )

P.O.Box 1095 Blindern
Oslo, N-0317
Norway

HOME PAGE: http://folk.uio.no/karineny/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Mari S. Rege

Case Western Reserve University - Department of Economics ( email )

Cleveland, OH 44106
United States
216-368-4185 (Phone)
216-368-5039 (Fax)

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