A comparison of endogenous and exogenous group formation to increase cooperation

Grouping cooperatively disposed subjects with one another has been shown to slow the decline of contributions
in public goods games. So far, similar findings have been obtained both when groups are exogenously formed by
the experimenter and when they are endogenously formed by algorithms taking subjects’ preferences for partners
into account. We designed an experiment in which internally homogeneous groups – composed of like-minded
subjects – can form either exogenously or endogenously, testing the conjecture that endogenously formed
groups of cooperators will outperform similar exogenously formed groups due to subjects’ decision rights in the
endogenous procedure. We find that the conjecture is not supported, discussing potential explanations.