Social Capital: The Role of Group Size and Heterogeneity

Group size and heterogeneity are important issues in the literature on cooperation. This study seeks to understand how group size and heterogeneity impinge on trust and cooperation using a repeated trust game. We find several interesting results. First, as expected in any finitely repeated game, subjects as individuals and in a group become less trusting and less reciprocal as the rounds progress. Second, the nature of cooperation also matters in understanding the factors influencing cooperation in a group. Third, income and caste heterogeneity affect cooperation and trust. We see a U-shaped relation between trust and group size that indicates the existence of threshold size of the groups for building social capital. Regarding the validity of these experimental results with the primary survey, the study finds that in villages where heterogeneity is negligible, people share a set of similar socio-cultural attributes that promotes cooperation as a cost-effective collective outcome. Thus, our experimental results are significantly valid in the context of community-based natural resource management. Further social capital like trust acts as a link between the group size, heterogeneity and cooperation. Therefore, policymakers should give due importance of the underlying issues related to group size and heterogeneity (that influence trust and cooperation.)