This paper studies the dynamics by which populations with heterogeneous preferences for public good provision sort themselves into communities. I conduct laboratory experiments to consider which institutions best facilitate efficient self-organization when residents can move freely between locations. I find that institutions requiring all residents of a community to pay equal taxes enable subjects to sort into stable, homogeneous communities. Though sorted, residents often fail to attain the provision level best suited for them. When residents can vote for local tax policies with ballots, along with their feet, each community converges to the most efficient outcome for its population. (JEL C73, D72, H21, H41, H71, H73)
We survey the growing literature on group formation in the context of three types of social dilemma games: public goods games, common pool resources, and the prisoner's dilemma. The 62 surveyed papers study the effect of different sorting mechanisms-endogenous, endogenous with the option to play the game, and exogenous-on cooperation rates. Our survey shows that cooperators are highly sensitive to the presence of free-riders, independently of the sorting mechanism. We complement the survey with a meta-analysis showing no difference in terms of cooperation between studies implementing an endogenous and exogenous sorting. What is more, we find that it is no more likely for a cooperator to be matched with like-minded partners in endogenously formed groups than in exogenously formed groups. These observations are related. As we show in the survey, the success of a sorting method in matching like-minded individuals and the levels of cooperation are closely interlinked. * For valuable insights at various stages of this work, we wish to thank Rachel Croson, Fabrice Le Lec, Marie-Claire Villeval and the participants at the IMEBESS meeting in Barcelona, the ASFEE meeting in Rennes, and at the Cooperation: Interdisciplinary Methods Workshop in Lille. We are also grateful to the authors who responded to our various requests on the ESA forum.
We survey the growing literature on group formation in the context of three types of social dilemma games: public goods games, common pool resources, and the prisoner’s dilemma. The 62 surveyed papers study the effect of different sorting mechanisms – endogenous, endogenous with the option to play the game, and exogenous – on cooperation rates. Our survey shows that cooperators are highly sensitive to the presence of free-riders, independently of the sorting mechanism. We complement the survey with a meta-analysis showing no difference in terms of cooperation between studies implementing an endogenous and exogenous sorting. What is more, we find that it is no more likely for a cooperator to be matched with like-minded partners in endogenously formed groups than in exogenously formed groups. These observations are related. As we show in the survey, the success of a sorting method in matching like-minded individuals and the levels of cooperation are closely interlinked.
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