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Grouping, in-group bias and the cost of cheating

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  • Michaeli, Moti

Abstract

The tendency of people to divide into groups and to show in-group bias – preferential treatment for insiders – is widely observed. This paper shows that it arises naturally when people incur a moral cost when defecting against cooperators, provided that this cost is concave in the number of such defections. If some people are asocial, i.e. insusceptible to the moral cost, then, under incomplete information, free-riding and cooperation can coexist within groups. Costly signaling of sociality enables groups to screen out free-riders, but its availability may decrease the welfare of all individuals in society. Finally, the concave moral cost is shown to be evolutionary stable with respect to an invasion by a convex mutation.

Suggested Citation

  • Michaeli, Moti, 2020. "Grouping, in-group bias and the cost of cheating," Games and Economic Behavior, Elsevier, vol. 121(C), pages 90-107.
    • Handle: RePEc:eee:gamebe:v:121:y:2020:i:c:p:90-107
    DOI: 10.1016/j.geb.2020.02.002
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    More about this item

    Keywords

    In-group bias; Group formation; Costly signaling; PD game; Social identity;
    All these keywords.

    JEL classification:

    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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