Heterogeneity and cooperation: The role of capability and valuation on public goods provision

Abstract

We experimentally investigate the effects of two different sources of heterogeneity – capability and valuation – on the provision of public goods when punishment is possible or not. We find that compared to homogeneous groups, asymmetric valuations for the public good have negative effects on cooperation and its enforcement through informal sanctions. Asymmetric capabilities in providing the public good, in contrast, have a positive and stabilizing effect on voluntary contributions. The main reason for these results is the different externalities contributions have on the other group members’ payoffs affecting individuals’ willingness to cooperate. We thus provide evidence that it is not the asymmetric nature of groups per se that facilitates or impedes collective action, but that it is rather the nature of asymmetry that determines the degree of cooperation and the level of public good provision.