Sharing among Clubs: A Club of Clubs Theory.

Abstract

This article investigates interclub sharing arrangements as a means for coping with random utilization without imposing capacity constraints that require members to be turned away. The optimal sharing rule and toll are identified for a two-club sharing scheme. When optimal sharing is invoked, the Pareto-optimal provision and membership size are determined for the two clubs and then contrasted with the Nash equilibrium, characterized by interclub easy riding. The use of a nonzero toll is shown to curtail easy riding but at the expense of too little sharing. An institutional arrangement, in which the club rather than the members pays the sharing toll, is shown to cause less distortion. Copyright 1992 by Royal Economic Society.