One lingering puzzle is why voluntary contributions to public goods decline over time in experimental and real-world settings. We show that the decline of cooperation is driven by individual preferences for imperfect conditional cooperation. Many people's desire to contribute less than others, rather than changing beliefs of what others will contribute over time or people's heterogeneity in preferences makes voluntary cooperation fragile. Universal free riding thus eventually emerges, despite the fact that most people are not selfish. (D12, D 83, H41, Z13)

Casual evidence as well as daily experience suggest that many people have a strong aversion against being the 'sucker' in social dilemma situations. As a consequence, those who cooperate may be willing to punish free-riding, even if this is costly for them and even if they cannot expect future benefits from their punishment activities. A main purpose of this paper is to show experimentally that there is indeed a widespread willingness of the cooperators to punish the free-riders. Our results indicate that this holds true even if punishment is costly and does not provide any material benefits for the punisher. In addition, we provide evidence that free-riders are punished the more heavily the more they deviate from the cooperation levels of the cooperators. Potential free-riders, therefore, can avoid or at least reduce punishment by increasing their cooperation levels. This, in turn, suggests that in the presence of punishment opportunities there will be less free riding. Testing this conjecture is the other major aim of our paper.

FLWNO

Do competitive markets remove the effect of social norms on market outcomes? Or are norms capable of exerting a persistent influence? In this article we report the results of a series of competitive market and bilateral bargaining experiments. They indicate that the norm of reciprocity gives rise to wages that are persistently above the competitive level. Moreover, wages under bilateral bargaining conditions coincide with wages in competitive markets, indicating that competition has a limited effect when the norm of reciprocity is operative. In addition, the results show that workers' reciprocal behavior increases effort and, hence, the efficiency of trades.

We introduce group cohesion to study the economic relevance of social relationships in team production. We operationalize measurement of group cohesion, adapting the “oneness scale” from psychology. A series of experiments, including a preregistered replication, reveals strong, positive associations between group cohesion and performance assessed in weak-link coordination games, with high-cohesion groups being likely to achieve superior equilibria. In exploratory analysis, we identify beliefs rather than social preferences as the primary mechanism through which factors proxied by group cohesion influence group performance. Our evidence provides proof of concept for group cohesion as a useful tool for economic research and practice.

A Simple Mechanism for the Efficient Provision of Public Goods: Experimental Evidence by Josef Falkinger, Ernst Fehr, Simon Gächter and Rudolf Winter-Ember. Published in volume 90, issue 1, pages 247-264 of American Economic Review, March 2000