An evolutionary game emerges when a subset of individuals incur costs to provide benefits to all individuals. Public goods games (PGG) cover the essence of such dilemmas in which cooperators are prone to exploitation by defectors. We model the population dynamics of a non-linear PGG and consider density-dependence on the global level, while the game occurs within local neighborhoods. At low cooperation, increases in the public good provide increasing returns. At high cooperation, increases provide diminishing returns. This mechanism leads to diverse evolutionarily stable strategies, including monomorphic and polymorphic populations, and neighborhood-size-driven state changes, resulting in hysteresis between equilibria. Stochastic or strategy-dependent variations in neighborhood sizes favor coexistence by destabilizing monomorphic states. We integrate our model with experiments of cancer cell growth and confirm that our framework describes PGG dynamics observed in cellular populations. Our findings advance the understanding of how neighborhood-size effects in PGG shape the dynamics of growing populations.
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