À-la-Carte or Smorgasbord? Multiproduct Clubs with Costly Exclusion

Abstract

Decentralized provision of multiple congestible and excludable goods is generally not socially optimal if similar goods are provided simultaneously by smorgasbord multiproduct clubs, which sell multiple club services at single prices, and other clubs, which sell services at individual prices. The different pricing rules for the similar club goods introduce an interclub externality: consumers have an incentive to use the services of smorgasbord multiproduct clubs at levels in excess of the socially optimal. The discrepancy between private and social valuations for the similar services disappears if the government intervenes and equalizes prices for the similar goods across the different types of clubs.