Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/223570
Authors: 
Bandyopadhyay, Siddhartha
Cabrales, Antonio
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8498
Abstract: 
We consider a model where agents differ in their ‘types’ which determines their voluntary contribution towards a public good. We analyze what the equilibrium composition of groups are under centralized and centralized choice. We show that there exists a top-down sorting equilibrium i.e. an equilibrium where there exists a set of prices which leads to groups that can be ordered by level of types, with the first k types in the group with the highest price and so on. This exists both under decentralized and centralized choosing. We also analyze the model with endogenous group size and examine under what conditions is top-down sorting socially efficient. We illustrate when integration (i.e. mixing types so that each group's average type if the same) is socially better than top-down sorting. Finally, we show that top down sorting is efficient even when groups compete among themselves.
Subjects: 
top down sorting
group formation
public good
segregation
integration
JEL: 
D02
D64
D71
H41
Document Type: 
Working Paper

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