Pricing group membership

Siddhartha Bandyopadhyay and Antonio Cabrales

Abstract: We consider a model where agents differ in their `types' which determines their voluntary contribution towards a public good. We analyze what the equilibrium composition of groups are under centralized and centralized 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 level of types, with the first k types in the group with the highest price and so on. This exists both under decentralized and centralized 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 if the same) is socially better than top-down sorting. Finally, we show that top down sorting is efficient even when groups compete among themselves.

Date: 2020-08
New Economics Papers: this item is included in nep-gth and nep-mic
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Related works:
Journal Article: Pricing group membership (2023)
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:arx:papers:2008.03102

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