Cooperation in Microcredit Borrowing Groups: Identity, Sanctions, and Reciprocity in the Production of Collective Goods

Individuals collectively participate in all manner of endeavors including, for example, babysitting cooperatives, bowling leagues, and community associations. And yet failure to produce collective goods when they are desired is also widespread, such as when childcare or group leisure activities are unavailable, or communities pollute their local environment. Producing most collective goods entails a collective action problem because the product depends on the cooperative behavior of members of a group. While each member decides whether to contribute to producing the collective good, each benefits when other members cooperate to produce the good. Given the ubiquity of cooperation and its failure, determining the mechanisms that will overcome the social dilemma between individual and collective interests inherent in collective goods production is a fundamental question in social science.1 Collective goods production depends on group members’compliance with behavior that achieves the group’s collective goals. The relationship between compliance rate and the amount of collective good produced may be an increasing or decreasing, monotonic or nonmonotonic function (Marwell and Oliver 1993; Cooperation in Microcredit Borrowing Groups: Identity, Sanctions, and Reciprocity in the Production of Collective Goods