How Does Clubs' Organizational Design Affect Competition Among Clubs?

CentER Discussion Paper No. 2007-27

TILEC Discussion Paper No. DP 2007-011

31 Pages Posted: 27 Sep 2005 Last revised: 3 Mar 2015

See all articles by Jens Prufer

Jens Prufer

Tilburg University - CentER; Tilburg University - Department of Economics; Tilburg University - Law and Economics Center (TILEC)

Uwe Walz

Goethe University Frankfurt - Institute of Economics; Center For Financial Studies (CFS); Leibniz Institute for Financial Research SAFE

Date Written: March 2007

Abstract

We analyze competition among clubs in which the status of club members is the crucial added value accruing to fellow club members through social interaction within the club (e.g. in country clubs, academic faculties, or internet communities). In the course of competition for new members, clubs trade off the effect of entry on average status of the club and candidates' monetary payment via an entrance fee. We show that the best candidates join the best clubs but they pay higher entrance fees than some lower ranking candidates. We distinguish among various decision rules and organizational set-ups, including majority voting, unanimity, and meritocracy. We find that, from a second-best welfare perspective, the unanimity rule implies inefficient exclusion of some candidates, while meritocracy and weighted majority voting lead to inefficient inclusion. Our main policy implication is that consensus-based clubs, such as many academic faculties in Europe, could improve the well-being of their members if they liberalized their internal decision making processes.

Keywords: Club theory, status organizations, design of decision making, collective action

JEL Classification: D71, L22, L31

Suggested Citation

Prufer, Jens and Walz, Uwe, How Does Clubs' Organizational Design Affect Competition Among Clubs? (March 2007). CentER Discussion Paper No. 2007-27, TILEC Discussion Paper No. DP 2007-011, Available at SSRN: https://ssrn.com/abstract=805685 or http://dx.doi.org/10.2139/ssrn.805685

Jens Prufer (Contact Author)

Tilburg University - CentER ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Uwe Walz

Goethe University Frankfurt - Institute of Economics ( email )

Postfach 81
D-60054 Frankfurt
Germany

Center For Financial Studies (CFS) ( email )

Gr├╝neburgplatz 1
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
83
Abstract Views
1,009
rank
358,423
PlumX Metrics