How Does Clubs' Organizational Design Affect Competition Among Clubs?
AbstractWe 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 lowerranking 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 leads to inefficient exclusion of some candidates, while meritocracy leads 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.
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Bibliographic InfoPaper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2007-011.
Date of creation: 2007
Date of revision:
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Web page: https://www.tilburguniversity.edu/research/institutes-and-research-groups/center-ar/
club theory; status organizations; design of decision making; collective action;
Other versions of this item:
- Prüfer, J. & Walz, U., 2007. "How does Clubs' Organizational Design Affect Competition Among Clubs?," Discussion Paper 2007-27, Tilburg University, Center for Economic Research.
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
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