Optimal and equilibrium membership in clubs in the presence of spillovers

This paper treats a partial equilibrium club economy in which clubs impose positive or negative externalities on one another. Both spillovers in conge stable good and crowding are studied. It is shown that an increase the rela tive strength of the first type of spillover may result in either an increa se or decrease in the optimal club size and public good levels. Spillovers in crowding, on the other hand, have a definite effect on the optimal membe rship and production of public good. These optimal outcomes are then compar ed to Nash equilibrium club size and public good provision when clubs are e stablished by profit maximizing entrepreneurs instead of asocial planner. ( C) 1999 Academic Press.