The joint liability literature claims that positive assortative matching, or risk homogeneity, is always the first best solution. We examine this claim in presence of group formation costs and find that the assertion is not always true.

We extend the model of friendship networks developed by Brueckner (2006) in two ways. First, we extend the level of indirect benefits by incorporating benefits from up to three links and explore its implication for the socially optimal and individual effort levels. Next, we generalize the...

This classroom experiment illustrates the efficiency-enhancing property of a Tiebout system in which local public goods decisions are determined by a political process. Students are given playing cards that induce diverse preferences for expenditures on alternative public goods and are initially...

In this note we provide conditions which ensure the existence of Nash networks in One-way flow models with cost heterogeneity.