Endogenous group formation via unproductive costs

Jason A. Aimone, Laurence R. Iannaccone, Michael D. Makowsky, Jared Rubin

Research output: Contribution to journalArticle

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 modifiedVCMgame-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.

Original languageEnglish (US)
Article numberrdt017
Pages (from-to)1215-1236
Number of pages22
JournalReview of Economic Studies
Volume80
Issue number4
DOIs
StatePublished - Oct 2013

Fingerprint

Group formation
Costs
Free riders
Clubs
Interaction
Exclusion
Productivity
Monitoring
Military
Sorting
Join
Substitution
Fees
Rate of return
Private investment
Ideology
Punishment

Keywords

  • Club goods
  • Endogenous group formation
  • Free riding
  • Laboratory experiment
  • Religion
  • Sacrifice
  • Self-selection
  • Voluntary contribution mechanism

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Aimone, J. A., Iannaccone, L. R., Makowsky, M. D., & Rubin, J. (2013). Endogenous group formation via unproductive costs. Review of Economic Studies, 80(4), 1215-1236. [rdt017]. https://doi.org/10.1093/restud/rdt017

Endogenous group formation via unproductive costs. / Aimone, Jason A.; Iannaccone, Laurence R.; Makowsky, Michael D.; Rubin, Jared.

In: Review of Economic Studies, Vol. 80, No. 4, rdt017, 10.2013, p. 1215-1236.

Research output: Contribution to journalArticle

Aimone, JA, Iannaccone, LR, Makowsky, MD & Rubin, J 2013, 'Endogenous group formation via unproductive costs', Review of Economic Studies, vol. 80, no. 4, rdt017, pp. 1215-1236. https://doi.org/10.1093/restud/rdt017
Aimone JA, Iannaccone LR, Makowsky MD, Rubin J. Endogenous group formation via unproductive costs. Review of Economic Studies. 2013 Oct;80(4):1215-1236. rdt017. https://doi.org/10.1093/restud/rdt017
Aimone, Jason A. ; Iannaccone, Laurence R. ; Makowsky, Michael D. ; Rubin, Jared. / Endogenous group formation via unproductive costs. In: Review of Economic Studies. 2013 ; Vol. 80, No. 4. pp. 1215-1236.
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