Bidding for Clubs
AbstractThis paper studies the mechanism by which club memberships, activities, and rules are chosen in a decentralized economy. For this purpose, we develop a model of competing auctions for club goods. This is a dynamic game where each seller first chooses an auction format; next, each buyer chooses a seller; and, finally, each buyer bids for membership. If sellers are restricted to simple auctions without reserve prices, then the decentralized equilibrium is generally inefficient across a multitude of important margins. However, if the sellers can compete by a broader class of auctions - and where the anonymity of buyer strategies implies coordination frictions - the sellers generally choose negative reserve prices and the equilibrium is constrained efficient. The advertisement of a negative reserve price is equivalent to the advertisement of an amenity that augments the value of the club good. The function of this amenity is to ensure a critical mass of bidders at the seller’s location. For example, if a firm is attempting to assemble a team to utilize a club good at its location, it will also choose to advertise commitment to an additional amenity, such as a set of free health club memberships, as a means to attract a critical mass of applicants.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2013-19.
Date of creation: 18 Sep 2013
Date of revision:
Contact details of provider:
Web page: http://www.econ.au.dk/afn/
clubs; coordination frictions; Mortensen tax; Hosios rule; competing auctions;
Find related papers by JEL classification:
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Williamson, Oliver E, 1971. "The Vertical Integration of Production: Market Failure Considerations," American Economic Review, American Economic Association, vol. 61(2), pages 112-23, May.
- Julien, B. & Kennes, J. & King, I., 1998.
"Bidding for Labour,"
dp98-03, Department of Economics, Simon Fraser University.
- Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
- Gianni De Fraja & Jozsef Sakovics, 2001.
"Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price,"
Journal of Political Economy,
University of Chicago Press, vol. 109(4), pages 842-863, August.
- Gianni De Fraja & Jozsef Sakovics, 2004. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," ESE Discussion Papers 36, Edinburgh School of Economics, University of Edinburgh.
- Berglas, Eitan, 1976. "Distribution of tastes and skills and the provision of local public goods," Journal of Public Economics, Elsevier, vol. 6(4), pages 409-423, November.
- P. Diamond, 1980.
"Aggregate Demand Management in Search Equilibrium,"
268, Massachusetts Institute of Technology (MIT), Department of Economics.
- Elinor Ostrom, 2010.
"Beyond Markets and States: Polycentric Governance of Complex Economic Systems,"
American Economic Review,
American Economic Association, vol. 100(3), pages 641-72, June.
- Ostrom, Elinor, 2009. "Beyond Markets and States: Polycentric Governance of Complex Economic Systems," Nobel Prize in Economics documents 2009-4, Nobel Prize Committee.
- Jean-Charles Rochet & Jean Tirole, 2003.
"Platform Competition in Two-Sided Markets,"
Journal of the European Economic Association,
MIT Press, vol. 1(4), pages 990-1029, 06.
- Rochet, Jean-Charles & Tirole, Jean, 2003. "Platform Competition in Two-Sided Markets," IDEI Working Papers 152, Institut d'Économie Industrielle (IDEI), Toulouse.
- Jean-Charles Rochet & Jean Triole, 2002. "Platform Competition in Two Sided Markets," FMG Discussion Papers dp409, Financial Markets Group.
- Bewley, Truman F, 1981. "A Critique of Tiebout's Theory of Local Public Expenditures," Econometrica, Econometric Society, vol. 49(3), pages 713-40, May.
- Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
- Julien, Benoit & Kennes, John & King, Ian, 2006.
"The Mortensen rule and efficient coordination unemployment,"
Elsevier, vol. 90(2), pages 149-155, February.
- John Kennes & Benoit Julien & Ian King, 2002. "The Mortensen Rule and Efficient Coordination Unemployment," Macroeconomics 0206001, EconWPA.
- McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
- Mortensen, Dale T., 2009.
Journal of Economic Theory,
Elsevier, vol. 144(6), pages 2336-2353, November.
- Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
- John Kennes & Daniel le Maire, 2013. "Competing Auctions of Skills," CAM Working Papers 2014_01, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.