Heterogeneity and cooperation: The role of capability and valuation on public goods provision

Felix Kölle

Most studies on collective action have focused on situations where agents with identical characteristics interact with each other. When considering social and economic life, however, people generally differ with respect to a variety of characteristics, such as preferences, resources, qualifications, and attitudes which, in turn, can affect their incentives to contribute to a collective good. As such, the existence and formation of homogeneous group environments can be regarded as an exception, rather than the rule. Yet, when, how, and to what degree collective action is affected by inequality among group members is a complex question that has attracted only minor attention so far. Consequently, studying these questions in a systematic manner and gaining a deeper understanding about the determinants and circumstances under which different types of heterogeneity affect collective action is of major importance.

In this Nottingham School of Economics working paper, in the Journal of Economic Behavior & Organization, Felix Kölle experimentally investigates the effects of two different sources of heterogeneity – valuations and capabilities – on the willingness to cooperate in social dilemmas when peer-punishment is possible or not. He finds that compared to homogeneous groups, asymmetric valuations for the public good have negative effects on cooperation and its enforcement through informal sanctions. Asymmetric capabilities in providing the public good, in contrast, have a positive and stabilizing effect on voluntary contributions. The main reason for these results are the different externalities contributions have on the other group members’ payoffs affecting individuals’ willingness to cooperate. These findings provide evidence that it is not the asymmetric nature of groups per se that facilitates or impedes collective action, but that it is rather the nature of asymmetry that determines the degree of cooperation and the level of public good provision.

Journal of Economic Behavior & Organization, “Heterogeneity and cooperation: The role of capability and valuation on public goods provision” by Felix Kölle.

http://dx.doi.org/10.1016/j.jebo.2014.11.009

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