Evidence shows that individuals often do not act in a completely selfish manner, but rather take into account the welfare of other parties when making decisions. But how decision-makers trade off costs and benefits when the costs are dispersed among many individuals is unclear. In a new publication, forthcoming in the Review of Economic Studies, Michael Kosfeld, Professor of Organization and Management at Goethe University Frankfurt, Heiner Schumacher (University of Leuven), Iris Kesternich (University of Leuven) and Joachim Winter (LMU) show that up to two thirds of individuals are ‘insensitive to group size’, attaching similar weights to small and large groups. These findings provide a new explanation for a number of empirical patterns, including political and medical decision-making, lobbying, tax evasion, and charity donations.
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