Team competition and the public goods game Jonathan H.W. Tan ⁎ , Friedel Bolle Department of Economics, European University Viadrina, 15207 Frankfurt (Oder), Germany Received 7 June 2006; received in revised form 31 October 2006; accepted 20 December 2006 Available online 24 April 2007 Abstract We experimentally investigate the effect of intergroup competition – with/out monetary incentives to win – on intragroup cooperation. In one-shot games, competition increases cooperation with/out incentives. In finitely repeated games, cooperation is sustained with incentives. Cooperation decreases (increases) in response to wins (losses). © 2007 Elsevier B.V. All rights reserved. Keywords: Comparison; Competition; Cooperation JEL: C70; C92; H41 1. Introduction How does intergroup competition affect intragroup cooperation? The strategic incentive from winning induces more cooperation, if a group's win increases one's monetary payoff. Intergroup competition decreases free riding in groups (Bornstein et al., 1990; Bornstein and Erev, 1994; Erev et al., 1993), improves coordination (Bornstein et al., 2002), and outperforms many other incentive mechanisms in sustaining productivity over time (Nalbantian and Schotter, 1997). But without perturbing a game's payoff structure, can mere intergroup comparison (without monetary incentives to win) affect cooperation? Social psychologists find that even competition with incentives orthogonal to the comparison variable can induce intragroup cooperation (Brown, 2000). In a field experiment on school children in a running task, Gneezy and Rustichini (2004) find improvements in the Economics Letters 96 (2007) 133 – 139 www.elsevier.com/locate/econbase ⁎ Corresponding author. Tel./fax: +49 335 5534 2401/2390. E-mail address: tan@euv-ffo.de (J.H.W. Tan). 0165-1765/$ - see front matter © 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.econlet.2006.12.031