On Cooperation in Open Communities

Abstract

Economic interactions often take place in open communities, in which agents are free to leave a community to join a more preferred one. Tiebout (1956) conjectured that “voting with feet” might generate considerable efficiency gains since individuals with different preferences sort themselves into different communities that suit them most. We provide new empirical insights into Tiebout’s intuition by showing that self-selection in open heterogeneous communities can significantly foster communities’ success. Voting with feet improves cooperation by facilitating the right initial match between individuals and institutions and by establishing a cooperative environment that is attractive for others to join.

Keywords: Open communities, endogenous choice, voting with feet, cooperation, social dilemmas

JEL Classification: C72, C92, H41