Community Dynamics in the Lab: Congestion, Public Good Provision, and Local Instability

Abstract

I study the dynamics of voluntary local public good provision in a free-mobility environment when agents differ substantially in the benefit they receive from the public good provided within their community. I find that subjects move in response to both provision and community composition but that the growth and stability of these communities are dictated by movement costs and crowding. When the public good is congestible, such that returns are lower for larger populations, communities are characterized by instability, cyclical fluctuations in local provision, and a dynamic in which low demanders continually chase high demanders through locations. When congestion is eliminated, agents with different preferences sometimes co-exist, but chronic, inefficient movement persists, suggesting that instability is driven by intrinsic preferences for community composition, as well as by sensitivity to congestion. While communities with high entry fees primarily attract those with high public good returns, segregation is not sufficient for overcoming free-riding.

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