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Sequencing of Club Enlargement: "big bang," "gradualism," and internal reform

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  • Michael Kunin

Abstract

In an incomplete contract framework, I analyse how a club chooses its enlargement strategy in the presence of congestion. The club faces two waves of applicants. The applicants are homogeneous within each wave but differ in their conformity to the club's standards across waves. For each wave, the club chooses between an early entry offer, when the club can enforce the applicant's reform, and a late entry offer, when the applicant has to reform itself in order to be admitted. In addition, the club undertakes its own internal reform which, if successful, can eliminate congestion. I show that the club uses the "gradualism" approach (admitting waves sequentially) when the waves substantially differ in their compliance with the club's standards, and the "big bang" approach (admitting waves simultaneously) otherwise. Moreover, the club never admits a less advanced wave before a more advanced one.

Suggested Citation

  • Michael Kunin, 2004. "Sequencing of Club Enlargement: "big bang," "gradualism," and internal reform," CERGE-EI Working Papers wp232, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    • Handle: RePEc:cer:papers:wp232
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    References listed on IDEAS

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    1. Klaus Wallner & Mike Burkart, 2000. "Club Enlargement: Early Versus Late Admittance," FMG Discussion Papers dp359, Financial Markets Group.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Transition; Club theory; Incomplete contracts.;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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