Clubs, advertising, and cost sharing

This article investigates the impact of advertising, an additional source o f club revenue, on membership. This issue is placed within the context of a dvertising on the Internet and corporate sponsorship of local events or pub lic institutions such as museums. Two scenarios are looked at In the first setting, a club's costs are shared among members and, in effect, also with a monopolist advertiser It is then shown that the presence of advertising r evenues could possibly limit the need for club financing and cost sharing v ia larger memberships. However in the second setting where it is assumed th at the club's costs are completely funded by advertising and no membership fees are charged, it is shown that the club provider's incentives are no lo nger contrary to those of the advertiser. The opposite holds, and there is no cost-sharing implication to cutback on membership.