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Efficient Large‐Size Coordination Via Voluntary Group Formation: An Experiment

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  • Chun‐Lei Yang
  • Mao‐Long Xu
  • Juanjuan Meng
  • Fang‐Fang Tang

Abstract

Efficient coordination in large groups is a fundamental issue in economic organizations. We consider the weak‐link game with the feature of economies of scale that is necessary for voluntary group growth, in a minimal setup with exit and merger options. We show that large groups with efficient outcomes prevail in most communities. Seed groups form that seem to set a norm of both maximal effort level and mutual trust that there will be no panic when seeing noisy dips. Initial doubters are eventually converted into norm abiders. A restart further speeds up the process of coordination success.

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  • Chun‐Lei Yang & Mao‐Long Xu & Juanjuan Meng & Fang‐Fang Tang, 2017. "Efficient Large‐Size Coordination Via Voluntary Group Formation: An Experiment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(2), pages 651-668, May.
    • Handle: RePEc:wly:iecrev:v:58:y:2017:i:2:p:651-668
    DOI: 10.1111/iere.12230
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    1. Edoardo Gallo & Yohanes E. Riyanto & Nilanjan Roy & Tat-How Teh, 2022. "Cooperation and punishment mechanisms in uncertain and dynamic networks," Papers 2203.04001, arXiv.org.
    2. Gallo, Edoardo & Riyanto, Yohanes E. & Roy, Nilanjan & Teh, Tat-How, 2022. "Cooperation and punishment mechanisms in uncertain and dynamic social networks," Games and Economic Behavior, Elsevier, vol. 134(C), pages 75-103.

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