Objective:

To explain how social identity affects individual decisions when a collective action problem is present, specifically to constitute a cooperative.

Methodology:

Proposal of a variant for the Hotelling's horizontal differentiation model following a marginalist perspective.

Results:

(1) Social identity can facilitate the formation of a critical mass to trigger collective action. (2) Social incentives can be used to overcome the credibility dilemma and enable cooperation among group members. (3) The sense of identity causes that the number of participants in a collective effort exceeds the optimal group size, which implies that membership, has to be limited.

Limitations:

It is necessary to generate empirical information in order to have a better understanding of how social identity affects the formation of cooperatives and other forms of social economy.

Conclusions:

According to the results, social identity can become a resource for action, enabling individuals in a community to act collectively to overcome market or state failures.

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