Non-Monotonic Group-Size Effect in Repeated Provision of Public Goods

This paper analyzes the impact of a group-size change on contributing incentives in repeated provision of pure public goods. We develop a model in which the group members interact repeatedly and might be temporarily unable to contribute to the public good production in some periods. We show that an increase in the group size generates two opposite effects -- the standard free-riding effect, which suppresses cooperation, and the novel large-scale effect, which enhances cooperation. Our results indicate that the former effect dominates in relatively large groups while the latter dominates in relatively small groups. We provide therefore a rationale for non-monotonic group-size effect which may explain the previous empirical and experimental findings