The Inter-Group Comparison – Intra-Group Cooperation Hypothesis: Comparisons between Groups Increase Efficiency in Public Goods Provision

Identifying methods to increase cooperation and efficiency in public goods provision is of vital interest for human societies. The methods that have been proposed often incur costs that (more than) destroy the efficiency gains through increased cooperation. It has for example been shown that inter-group conflict increases intra-group cooperation, however at the cost of collective efficiency. We propose a new method that makes use of the positive effects associated with inter-group competition but avoids the detrimental (cost) effects of a structural conflict. We show that the mere comparison to another structurally independent group increases both the level of intra-group cooperation and overall efficiency. The advantage of this new method is that it directly transfers the benefits from increased cooperation into increased efficiency. In repeated public goods provision we experimentally manipulated the participants' level of contribution feedback (intra-group only vs. both intra- and inter-group) as well as the provision environment (smaller groups with higher individual benefits from cooperation vs. larger groups with lower individual benefits from cooperation). Irrespective of the provision environment groups with an inter-group comparison opportunity exhibited a significantly stronger cooperation than groups without this opportunity. Participants conditionally cooperated within their group and additionally acted to advance their group to not fall behind the other group. The individual efforts to advance the own group cushion the downward trend in the above average contributors and thus render contributions on a higher level. We discuss areas of practical application.