Heterogeneity, social esteem and feasibility of collective action

In the presence of individual heterogeneity, a major problem with egalitarian partnership, such as complete income pooling, is that individuals of comparatively high ability are induced to exit the arrangement. This is nevertheless ignoring the possible impact of social esteem considerations based on a comparison of members' performances. In this paper, drawing inspiration from pooling experiences in a Japanese fishery, we show that the exit problem can be surmounted if sensitivity to social esteem is neither too strong nor too weak. If it is too strong, the lower ability agents will exit out of social shame whereas, if it is too weak, the higher ability agents will not consider it worthwhile to transfer income to their partners. When the arrangement is sustainable, the lower ability people strive towards limiting the income gap.