Private incentives to invest in a public good are modeled as self-interested reciprocity where individuals use reputational scoring rules to determine their optimal level of investment. The model suggests that any subject can be classified as either a "free-rider" or a "cooperator" based on their first period investment in a voluntary contribution experiment and predicts that excluding free-riders will improve, and in some circumstances sustain, cooperators’ private investment in the public good. Actual investment behavior is then studied with laboratory experiments that compare the contributions of subjects randomly reassigned into groups to contributions under a mechanism that sorts subjects into groups based on their individual investment decisions. The sorting mechanism helps to exclude free-riders from cooperators and leads to statistically significant increases in cooperators’ investments in the public good.

Co-authors Anna Gunthorsdottir, Kevin McCabe and Holly Ameden