A Theory of Association: Social Status, Prices and Markets

Kaushik Basu

Oxford Economic Papers, 1989, vol. 41, issue 4, 653-71

Abstract: The utility from some commodities depends on the allocation rule used to distribute them because, by the acquisition of such a commodity, a person tries to gain "association" with its other recipients. Such a commodity is called an association good and it is shown that its existence can jeopardize the economist's standard model of markets. For example, demand may not equal supply in equilibrium and the very use of the price mechanism to distribute an association good could diminish its value. These and other properties are illustrated by analyzing some specific association goods, like club memberships and school admissions. Copyright 1989 by Royal Economic Society.

Date: 1989
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