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Strategy-Proof Club Formation with Indivisible Club Facilities

Author

Listed:
  • Bhaskar Dutta

    (Department of Economics, Ashoka University)

  • Anirban Kar

    (Delhi School of Economics)

Abstract

We investigate the strategy-proof provision and financing of indivisible club good facilities when individuals are subject to congestion costs that are nondecreasing in the number of other club members and in a private type parameter. An allocation rule specifies how the individuals are to be partitioned into clubs and how the costs of the facilities are to be shared by club members as a function of the types. We show that no allocation rule is strategy-proof and cost efficient (i.e., it always minimizes the aggregate of the financial and congestion costs of the club facilities) when congestion costs are strictly increasing in the type parameter, but that these properties are compatible if congestion costs are dichotomous and costs are equally shared within a club. We also provide examples of strategy-proof allocation rules with equal cost sharing that are (i) Pareto optimal and (ii) Pareto optimal, nondictatorial, and individually rational when the congestion cost is linear in the type parameter.

Suggested Citation

  • Bhaskar Dutta & Anirban Kar, 2020. "Strategy-Proof Club Formation with Indivisible Club Facilities," Working Papers 47, Ashoka University, Department of Economics.
    • Handle: RePEc:ash:wpaper:47
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    File URL: https://dp.ashoka.edu.in/ash/wpaper/paper47_0.pdf
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    References listed on IDEAS

    as
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    3. Yan Long, 2019. "Strategy-proof group selection under single-peaked preferences over group size," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(3), pages 579-608, October.
    4. Anna Bogomolnaia & Antonio Nicolò, 2005. "Stable Assignment of Public Facilities under Congestion," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(1), pages 65-91, February.
    5. Bogomolnaia, Anna & Jackson, Matthew O., 2002. "The Stability of Hedonic Coalition Structures," Games and Economic Behavior, Elsevier, vol. 38(2), pages 201-230, February.
    6. Cornes,Richard & Sandler,Todd, 1996. "The Theory of Externalities, Public Goods, and Club Goods," Cambridge Books, Cambridge University Press, number 9780521477185, November.
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    More about this item

    Keywords

    club goods;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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