Group Identity, Cooperation and Motivation Crowding-out

<p>The phenomenon of group identity, thoroughly studied in sociology and recently introduced into economic literature, has important effects on decision-making in a range of real-life situations. In particular, it can improve cooperation within groups. This experimental paper studies how effective is group identity compared to traditional monetary incentives, and whether these instruments complement or substitute each other. We study the subjects&#39; behavior in a public good experiment, varying the strength of group identity (between groups) and the presence of monetary incentives (within groups). We demonstrate that while both group identity and monetary incentives are effective per se, their combination does not further improve cooperation. This result may be tentatively explained by crowding-out of image motivation by extrinsic incentives. We demonstrate that expectations are an important channel that mediates the effect of group identity on cooperation. Unlike previous studies, we find a significant difference in expectations regarding other group members&#39; contributions between groups with high and low identity. Moreover, members of high-identity groups overestimate the effect of additional monetary incentives. Our findings suggest that boosting group identity and providing monetary incentives may be substitute instruments for improving group cooperation, and one should be careful when applying both of them simultaneously.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</p>