Evolution of cooperation in rotating indivisible goods game

Abstract

Collective behavior is theoretically and experimentally studied through a public goods game in which players contribute resources or efforts to produce goods (or pool), which are then divided equally among all players regardless of the amount of their contribution. However, if goods are indivisible, only one player can receive the goods. In this case, the problem is how to distribute indivisible goods, and here therefore we propose a new game, namely the "rotating indivisible goods game." In this game, the goods are not divided but distributed by regular rotation. An example is rotating savings and credit associations (ROSCAs), which exist all over the world and serve as efficient and informal institutions for collecting savings for small investments. In a ROSCA, members regularly contribute money to produce goods and to distribute them to each member on a regular rotation. It has been pointed out that ROSCA members are selected based on their reliability or reputation, and that defectors who stop contributing are excluded. We elucidate mechanisms that sustain cooperation in rotating indivisible goods games by means of evolutionary simulations. First, we investigate the effect of the peer selection rule by which the group chooses members based on the players reputation, also by which players choose groups based on their reputation. Regardless of the peer selection rule, cooperation is not sustainable in a rotating indivisible goods game. Second, we introduce the forfeiture rule that forbids a member who has not contributed earlier from receiving goods. These analyses show that employing these two rules can sustain cooperation in the rotating indivisible goods game, although employing either of the two cannot. Finally, we prove that evolutionary simulation can be a tool for investigating institutional designs that promote cooperation.