Abstract
A natural club monopoly exists when economies of scale are so significant relative to population size that, in the efficient allocation, the entire population is included in a single club. Under these circumstances, an uncontested monopolist will inefficiently exclude some individuals from the club if marginal congestion costs are sufficiently high when the entire population is included. If admitting that the entire population is profit-maximizing, then the facility size chosen is also efficient. A perfectly contestable monopoly is always efficient. External economies of scale exist when the cost of each facility declines as more facilities are provided. This externality leads a competitive market to provide too few clubs, but a monopolist will provide an efficient allocation because it internalizes the cost externality. Copyright 1990 by The London School of Economics and Political Science.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
