Discrimination via Exclusion: An Experiment on Group Identity and Club Goods

Abstract We study using laboratory experiments the impact on cooperation of allowing individuals to invest in group‐specific, excludable public goods. We find that allowing different social groups to voluntarily contribute to such goods increases total contributions. However, a significant proportion of that contribution goes toward the group‐specific club good rather than the public good, even when the latter has higher financial returns to cooperation. We find significant evidence of in‐group biases, which are manifested by positive in‐group reciprocity. That is, club goods allow subjects to display their preferences for interaction with their in‐group members, as well as positive in‐group reciprocity.