Pricing group membership

Siddhartha Bandyopadhyay and Antonio Cabrales

Mathematical Social Sciences, 2023, vol. 123, issue C, 114-121

Abstract: We consider a model where agents differ in their ‘types’ which determines their contribution towards a club good (i.e public good within a group). We analyze what the equilibrium composition of groups are under mandated and voluntary choice. We show that there exists a top-down sorting equilibrium i.e. an equilibrium where there exists a set of prices which leads to groups that can be ordered by sets of types, with the highest types in the group paying the highest price and so on. This exists both under mandated and voluntary choosing. We also analyze the model with endogenous group size and examine under what conditions is top-down sorting socially efficient. We illustrate when integration (i.e. mixing types so that each group’s average type is the same) is socially better than top-down sorting.

Keywords: Top-down sorting; Group formation; Public good; Segregation; Integration (search for similar items in EconPapers)
Date: 2023
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Related works:
Working Paper: Pricing group membership (2020)
Working Paper: Pricing group membership (2020)
Working Paper: Pricing Group Membership (2020)
Working Paper: Pricing group membership (2020)
Working Paper: Pricing group membership (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:123:y:2023:i:c:p:114-121

DOI: 10.1016/j.mathsocsci.2023.02.009

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