Axelrod (The evolution of cooperation, 1984) and others explain how cooperation can emerge in repeated 2-person prisoner’s dilemmas. But in public good games with anonymous contributions, we expect a breakdown of cooperation because direct reciprocity fails. However, if agents are situated in a social network determining which agents interact, and if they can influence the network, then cooperation can be a viable strategy. Social networks are modelled as graphs. Agents play public good games with their neighbours. After each game, they can terminate connections to others, and new connections are created. Cooperative agents do well because they manage to cluster with cooperators and avoid defectors. Computer simulations demonstrate that group formation and exclusion are powerful mechanisms to promote cooperation in dilemma situations. This explains why social dilemmas can often be solved if agents can choose with whom they interact.