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T-Space at The University of Toronto Libraries >
Theoretical Economics >
Volume 4, Number 1 (March 2009) >

Please use this identifier to cite or link to this item: http://hdl.handle.net/1807/17333

Title: Monopolistic group design with peer effects
Authors: Simon Board; Department of Economics, University of California Los Angeles
Keywords: Mechanism design, peer effects, public goods, network effects
D82, H40, L12
Issue Date: 1-Mar-2009
Publisher: Theoretical Economics
Citation: Theoretical Economics; Vol 4, No 1 (2009)
Abstract: [This item is a preserved copy. To view the original, visit http://econtheory.org/] In a range of settings, private firms manage peer effects by sorting agents into different groups, be they schools, communities, or product categories. This paper considers such a firm, which controls group entry by setting a series of anonymous prices. We show that private provision systematically leads to two distortions relative to the efficient solution: first, agents are segregated too finely; second, too many agents are excluded from all groups. We demonstrate that these distortions are a consequence of anonymous pricing and do not depend upon the nature of the peer effects. This general approach also allows us to assess the way the `returns to scale' of peer technology and the cost of group formation affect the optimal group structure.
URI: http://hdl.handle.net/1807/17333
Other Identifiers: http://econtheory.org/ojs/index.php/te/article/view/20090089
Rights: Authors who publish in <i>Theoretical Economics</i> will release their articles under the <a href="http://creativecommons.org/licenses/by-nc/2.5/">Creative Commons Attribution-NonCommercial license</a>. This license allows anyone to copy and distribute the article for non-commercial purposes provided that appropriate attribution is given.
Appears in Collections:Volume 4, Number 1 (March 2009)

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