Group formation, in-group bias and the cost of cheating
Title: Group formation, in-group bias and the cost of cheating
Author: MICHAELI, Moti
Series/Number: EUI MWP; 2015/04
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 signaling is costly, and its availability may decrease the welfare of all the individuals in society.
Subject: In-group bias; Group formation; Costly signaling; Prisoner's dilemma game; D7; D03; Z13; D64; D82; C72
Type of Access: openAccess