Prestige Clubs

24 Pages Posted: 6 Oct 2013

See all articles by Richard C. Cornes

Richard C. Cornes

Australian National University (ANU) - Faculty of Economics & Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Emilson Delfino Silva

University of Alberta - Department of Marketing, Business Economics & Law

Date Written: July 11, 2013

Abstract

Numerous non-profit organizations that contribute to collective goods also provide prestige to their members. Some of these institutions function as prestige clubs, with prestige levels and member contributions working as club goods and membership fees, respectively. We investigate the endogenous formation of prestige clubs. We show that the competitive equilibrium features prestige clubs and that competing club managers engage in a futile race for institutional aggrandizement. The competition, however, yields coordination benefits produced by internalization of positive and negative externalities within clubs. The competitive equilibrium is inefficient because clubs neglect external benefits and costs associated with their members’ contributions.

Keywords: prestige, clubs, non-profit organizations, charities, public goods

JEL Classification: D02, D62, D64, D71, H41

Suggested Citation

Cornes, Richard C. and Delfino Silva, Emilson, Prestige Clubs (July 11, 2013). University of Alberta School of Business Research Paper No. 2013-1315. Available at SSRN: https://ssrn.com/abstract=2336218 or http://dx.doi.org/10.2139/ssrn.2336218

Richard C. Cornes

Australian National University (ANU) - Faculty of Economics & Commerce ( email )

Canberra, Australian Capital Territory 2601
Australia

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Emilson Delfino Silva (Contact Author)

University of Alberta - Department of Marketing, Business Economics & Law ( email )

Edmonton, Alberta T6G 2R6
Canada

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