IDEAS home Printed from https://ideas.repec.org/p/eui/euiwps/mwp2015-04.html
   My bibliography  Save this paper

Group Formation, In-group Bias and the Cost of Cheating

Author

Listed:
  • Michaeli, Moti

Abstract

Group formation and in-group bias - preferential treatment for insiders - are widely observed social phenomena. This paper demonstrates how they arise naturally when people incur a psychological cost as the result of defecting when facing cooperators, when this cost is increasing and concave in the number of such defections. If some group members are asocial, i.e., insusceptible to that cost, then, under incomplete information, free-riding and cooperation can coexist within groups. Signaling of one's type can enable groups to screen out free-riders, but signalling is costly, and its availability may decrease the welfare of all the individuals in society.

Suggested Citation

  • Michaeli, Moti, 2015. "Group Formation, In-group Bias and the Cost of Cheating," Economics Working Papers MWP2015/04, European University Institute.
    • Handle: RePEc:eui:euiwps:mwp2015/04
    as

    Download full text from publisher

    File URL: http://cadmus.eui.eu/bitstream/handle/1814/35218/MWP_2015_04.pdf
    File Function: main text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(3), pages 817-868.
    2. Gilat Levy & Ronny Razin, 2012. "Religious Beliefs, Religious Participation, and Cooperation," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 121-151, August.
    3. Lorenz Goette & David Huffman & Stephan Meier, 2006. "The Impact of Group Membership on Cooperation and Norm Enforcement: Evidence Using Random Assignment to Real Social Groups," American Economic Review, American Economic Association, vol. 96(2), pages 212-216, May.
    4. Rapoport, Hillel & Weiss, Avi, 2003. "The optimal size for a minority," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 27-45, September.
    5. Ruffle Bradley J. & Sosis Richard, 2007. "Does It Pay To Pray? Costly Ritual and Cooperation," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-37, March.
    6. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
    7. Lundquist, Tobias & Ellingsen, Tore & Gribbe, Erik & Johannesson, Magnus, 2009. "The aversion to lying," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 81-92, May.
    8. Foster, Andrew D & Rosenzweig, Mark R, 1995. "Learning by Doing and Learning from Others: Human Capital and Technical Change in Agriculture," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1176-1209, December.
    9. Topi Miettinen & Sigrid Suetens, 2008. "Communication and Guilt in a Prisoner's Dilemma," Journal of Conflict Resolution, Peace Science Society (International), vol. 52(6), pages 945-960, December.
    10. Oliver Kim & Mark Walker, 1984. "The free rider problem: Experimental evidence," Public Choice, Springer, vol. 43(1), pages 3-24, January.
    11. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-338, May.
    12. Mark Isaac, R. & McCue, Kenneth F. & Plott, Charles R., 1985. "Public goods provision in an experimental environment," Journal of Public Economics, Elsevier, vol. 26(1), pages 51-74, February.
    13. Palfrey, Thomas R. & Rosenthal, Howard, 1988. "Private incentives in social dilemmas : The effects of incomplete information and altruism," Journal of Public Economics, Elsevier, vol. 35(3), pages 309-332, April.
    14. Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(3), pages 905-950.
    15. Jason A. Aimone & Laurence R. Iannaccone & Michael D. Makowsky & Jared Rubin, 2013. "Endogenous Group Formation via Unproductive Costs," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1215-1236.
    16. Bradley Ruffle & Richard Sosis, 2003. "Religious ritual and cooperation: Testing for a relationship on israeli religious and secular kibbutzim," Artefactual Field Experiments 00103, The Field Experiments Website.
    17. Bogomolnaia, Anna & Jackson, Matthew O., 2002. "The Stability of Hedonic Coalition Structures," Games and Economic Behavior, Elsevier, vol. 38(2), pages 201-230, February.
    18. Tayfun Sönmez & Suryapratim Banerjee & Hideo Konishi, 2001. "Core in a simple coalition formation game," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(1), pages 135-153.
    19. Bendor, Jonathan & Mookherjee, Dilip, 1987. "Institutional Structure and the Logic of Ongoing Collective Action," American Political Science Review, Cambridge University Press, vol. 81(1), pages 129-154, March.
    20. Biele, Guido & Rieskamp, Jörg & Czienskowski, Uwe, 2008. "Explaining cooperation in groups: Testing models of reciprocity and learning," Organizational Behavior and Human Decision Processes, Elsevier, vol. 106(2), pages 89-105, July.
    21. Bruno S. Frey & Stephan Meier, 2004. "Social Comparisons and Pro-social Behavior: Testing "Conditional Cooperation" in a Field Experiment," American Economic Review, American Economic Association, vol. 94(5), pages 1717-1722, December.
    22. Ruffle, Bradley J. & Sosis, Richard, 2006. "Cooperation and the in-group-out-group bias: A field test on Israeli kibbutz members and city residents," Journal of Economic Behavior & Organization, Elsevier, vol. 60(2), pages 147-163, June.
    23. Frank, Robert H, 1987. "If Homo Economicus Could Choose His Own Utility Function, Would He Want One with a Conscience?," American Economic Review, American Economic Association, vol. 77(4), pages 593-604, September.
    24. Glenn Ellison, 1994. "Cooperation in the Prisoner's Dilemma with Anonymous Random Matching," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 567-588.
    25. R. Isaac & James Walker & Susan Thomas, 1984. "Divergent evidence on free riding: An experimental examination of possible explanations," Public Choice, Springer, vol. 43(2), pages 113-149, January.
    26. Martin A. Nowak & Karl Sigmund, 1998. "Evolution of indirect reciprocity by image scoring," Nature, Nature, vol. 393(6685), pages 573-577, June.
    27. T. K. Ahn & R. Mark Isaac & Timothy C. Salmon, 2008. "Endogenous Group Formation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(2), pages 171-194, April.
    28. Iannaccone, Laurence R, 1992. "Sacrifice and Stigma: Reducing Free-Riding in Cults, Communes, and Other Collectives," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 271-291, April.
    29. M.A. Nowak & K. Sigmund, 1998. "Evolution of Indirect Reciprocity by Image Scoring/ The Dynamics of Indirect Reciprocity," Working Papers ir98040, International Institute for Applied Systems Analysis.
    30. Anderson, Simon P. & Goeree, Jacob K. & Holt, Charles A., 1998. "A theoretical analysis of altruism and decision error in public goods games," Journal of Public Economics, Elsevier, vol. 70(2), pages 297-323, November.
    31. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    32. Gneezy, Uri & Rockenbach, Bettina & Serra-Garcia, Marta, 2013. "Measuring lying aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 93(C), pages 293-300.
    33. Holt, Charles A. & Laury, Susan K., 2008. "Theoretical Explanations of Treatment Effects in Voluntary Contributions Experiments," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 90, pages 846-855, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michaeli, Moti, 2020. "Grouping, in-group bias and the cost of cheating," Games and Economic Behavior, Elsevier, vol. 121(C), pages 90-107.
    2. Ananish Chaudhuri, 2011. "Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature," Experimental Economics, Springer;Economic Science Association, vol. 14(1), pages 47-83, March.
    3. Arifovic, Jasmina & Ledyard, John, 2012. "Individual evolutionary learning, other-regarding preferences, and the voluntary contributions mechanism," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 808-823.
    4. Kurt A. Ackermann & Ryan O. Murphy, 2019. "Explaining Cooperative Behavior in Public Goods Games: How Preferences and Beliefs Affect Contribution Levels," Games, MDPI, vol. 10(1), pages 1-34, March.
    5. Ambrus, Attila & Pathak, Parag A., 2011. "Cooperation over finite horizons: A theory and experiments," Journal of Public Economics, Elsevier, vol. 95(7), pages 500-512.
    6. Boosey, Luke A., 2017. "Conditional cooperation in network public goods experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 69(C), pages 108-116.
    7. Masel, Joanna, 2007. "A Bayesian model of quasi-magical thinking can explain observed cooperation in the public good game," Journal of Economic Behavior & Organization, Elsevier, vol. 64(2), pages 216-231, October.
    8. R. Isaac & Douglas Norton, 2013. "Endogenous institutions and the possibility of reverse crowding out," Public Choice, Springer, vol. 156(1), pages 253-284, July.
    9. Jeannette Brosig & Joachim Weimann & Axel Ockenfels, 2003. "The Effect of Communication Media on Cooperation," German Economic Review, Verein für Socialpolitik, vol. 4(2), pages 217-241, May.
    10. Andreas Löschel & Dirk Rübbelke, 2014. "On the Voluntary Provision of International Public Goods," Economica, London School of Economics and Political Science, vol. 81(322), pages 195-204, April.
    11. Ben-Ner, Avner & Putterman, Louis & Kong, Fanmin & Magan, Dan, 2004. "Reciprocity in a two-part dictator game," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 333-352, March.
    12. Jasmina Arifovic & John Ledyard, 2012. "Individual Evolutionary Learning, Other-regarding Preferences, and the Voluntary Contributions Mechanism," Discussion Papers wp12-01, Department of Economics, Simon Fraser University.
    13. Xiaofei Sophia Pan & Daniel Houser, 2011. "Competition for Trophies Triggers Male Generosity," PLOS ONE, Public Library of Science, vol. 6(4), pages 1-6, April.
    14. Alexis Belianin & Marco Novarese, 2005. "Trust, communication and equlibrium behaviour in public goods," Experimental 0506001, University Library of Munich, Germany.
    15. Bogliacino, Francesco & Codagnone, Cristiano, 2021. "Microfoundations, behaviour, and evolution: Evidence from experiments," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 372-385.
    16. Luigi Butera & John A. List, 2017. "An Economic Approach to Alleviate the Crises of Confidence in Science: With an Application to the Public Goods Game," NBER Working Papers 23335, National Bureau of Economic Research, Inc.
    17. Kim, Jeongbin & Putterman, Louis & Zhang, Xinyi, 2022. "Trust, Beliefs and Cooperation: Excavating a Foundation of Strong Economies," European Economic Review, Elsevier, vol. 147(C).
    18. Daniel Friedman & Nirvikar Singh, 2004. "Vengefulness Evolves in Small Groups," Palgrave Macmillan Books, in: Steffen Huck (ed.), Advances in Understanding Strategic Behaviour, chapter 3, pages 28-54, Palgrave Macmillan.
    19. Friedman, Daniel & Singh, Nirvikar, 2004. "Vengefulness Evolves in Small Groups," Santa Cruz Department of Economics, Working Paper Series qt0xp29105, Department of Economics, UC Santa Cruz.
    20. Barron, Kai & Nurminen, Tuomas, 2020. "Nudging cooperation in public goods provision," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 88, pages 1-1.

    More about this item

    Keywords

    In-Group Bias; Group Formation; Costly Signalling; Prisoner's Dilemma Game;
    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eui:euiwps:mwp2015/04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Cécile Brière (email available below). General contact details of provider: https://edirc.repec.org/data/deiueit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.