Cooperative Behavior in Farmer Clubs: Experimental Evidence from Malawi

Farmer clubs play an important role in improving the lives of millions of farmers in developing countries as they can resolve critical market failures, ranging from providing access to output markets and club-based input credit to sharing technology and marketing information. The efficacy of farmer clubs, however, depends on successful collaboration between members and their ability to overcome free-riding. In this study, we conducted a public goods game among farmer clubs in Malawi. In this game, club members were asked to divide 400 Malawian kwacha between an individual account and a common account. At the end of the game, the funds in the common account were multiplied by two and used by the club to provide a public good of their choice. Using the amount contributed into the common account as a measure of cooperative behavior, we find that most club members display some level of cooperative behavior, and that the extent of this cooperative behavior critically depends on an individual’s relative status within the club. Individuals with a higher status cooperate less compared to individuals with a lower status. In addition, women appear to be less cooperative compared to men. We show that these results are consistent with the predictions of a Voluntary Contribution Nash Equilibrium in which club members are uncertain about each other’s valuations and expect a bargaining process (as opposed to democratic process) to resolve these uncertainties and provide a resolution as to which public good the club selects at the end of the game.