Price Taking Equilibrium in Club Economies with Multiple Memberships and Unbounded Club Sizes

Queen Mary, University of London Economics Working Paper No. 513

34 Pages Posted: 13 Apr 2004

See all articles by Nizar Allouch

Nizar Allouch

Queen Mary, University of London

Myrna H. Wooders

Vanderbilt University - College of Arts and Science - Department of Economics

Date Written: April 2004

Abstract

This paper develops a model of an economy with clubs where individuals may belong to multiple clubs and where there may be ever increasing returns to club size. Clubs may be large, as large as the total agent set. The main condition required is that sufficient wealth can compensate for memberships in larger and larger clubs. Notions of price taking equilibrium and the core, both with communication costs, are introduced. These notions require that there is a small cost, called a communication cost, of deviating from a given outcome. With some additional standard sorts of assumptions on preferences, we demonstrate that, given communication costs parameterized by epsilon > 0, for all sufficiently large economies, the core is non-empty and contains states of the economy that are in the core of the replicated economy for all replications (Edgeworth states of the economy). Moreover, for any given economy, every state of the economy that is in the core for all replications of that economy can be supported as a price-taking equilibrium with communication costs. Together these two results imply that, given the communication costs, for all sufficiently large economies there exists Edgeworth states of the economy and every Edgeworth state can be supported as a price-taking equilibrium.

Keywords: Competitive pricing, Clubs, Local public goods, Hedonic coalitions, Edgeworth, Tiebout hypothesis, Core

JEL Classification: C62, D71, H41

Suggested Citation

Allouch, Nizar and Wooders, Myrna H., Price Taking Equilibrium in Club Economies with Multiple Memberships and Unbounded Club Sizes (April 2004). Queen Mary, University of London Economics Working Paper No. 513. Available at SSRN: https://ssrn.com/abstract=528884 or http://dx.doi.org/10.2139/ssrn.528884

Nizar Allouch (Contact Author)

Queen Mary, University of London ( email )

Mile End Road
London, London E1 4NS
United Kingdom

Myrna H. Wooders

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
48
Abstract Views
556
PlumX Metrics