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| Título | A strategic model of club formation; existence and characterization of equilibrium |
| Publication Type | Unpublished |
| Year of Publication | 2006 |
| Authors | Faias M, Wooders M |
| Series Title | Preprint |
| Abstract | We introduce a new model of a club economy as a two stage game. Players derive utility from consumption of private good, consumption of public good, and the profile of crowding characteristics - those characteristics of a player that directly affect other players - of members of the same club. In the first stage of the game, players choose amounts to consume of an endowment of private good. The crowding characteristics acquired by a player are determined by his choice of consumption level, as is the amount of private good remaining to contribute to the production of the club good in the second stage of the game. In the second stage of the game, given the profile of crowding characteristics of the total player set, club memberships are endogenously determined as outcomes of subgame perfect equilibrium. We establish conditions for the existence of equilibrium and provide some examples illustrating that characterization results from models of club economies with price-taking equilibrium do not necessarily hold. |
| URL | http://www.dm.fct.unl.pt/sites/www.dm.fct.unl.pt/files/preprints/2006/14_06.pdf |