Pricing Group Membership

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 8498

Classification and Topics

• Classification: Wirtschaft ; Institutions: Design, Formation, Operations, and Impact ; Altruism; Philanthropy; Intergenerational Transfers ; Social Choice; Clubs; Committees; Associations ; Public Goods
• Subject: top down sorting ; group formation ; public good ; segregation ; integration

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bandyopadhyay, Siddhartha ; Cabrales, Antonio
• Event: Veröffentlichung
• (who): Center for Economic Studies and Ifo Institute (CESifo)
• (where): Munich
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/223570
• Last update: 10.03.2025, 11:42 AM CET