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Pricing group membership

Siddhartha Bandyopadhyay and Antonio Cabrales ()

Discussion Papers from Department of Economics, University of Birmingham

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 effcient. 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.

Keywords: Top down sorting; Group formation; Public good; Segregation; Integration. (search for similar items in EconPapers)
JEL-codes: D02 D64 D71 H41 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2020-08
New Economics Papers: this item is included in nep-cdm, nep-gth, nep-mic and nep-pub
References: View references in EconPapers View complete reference list from CitEc
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Downloads: (external link)
https://repec.cal.bham.ac.uk/pdf/20-18.pdf

Related works:
Working Paper: Pricing group membership (2020) Downloads
Working Paper: Pricing Group Membership (2020) Downloads
Working Paper: Pricing group membership (2020) Downloads
Working Paper: Pricing group membership (2020) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bir:birmec:20-18

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