Group size, signaling and the effect of democracy

Abstract

A number of papers document that rules governing social dilemmas work better when implemented democratically than when imposed from above (the “effect of democracy”). This paper presents a theoretical model of the effect of democracy and uses laboratory experiments to test a key prediction emerging from the model, namely that the effect of democracy is stronger in small than in large communities. Results from a prisoner's dilemma experiment show that an effect of democracy is present in groups of all sizes but decreases strongly and becomes less persistent as the number of group members increases. In some respects, therefore, democracy appears to work best in small groups.