Club goods

Club goods (also artificially scarce goods) are a type of good in economics, sometimes classified as a subtype of public goods that are excludable but non-rivalrous, at least until reaching a point where occurs. These goods are often provided by a natural monopoly. Club goods have artificial scarcity. Club theory is the area of economics that studies these goods.

Examples of club goods include, cinemas, cable television, access to copyrighted works, and the services provided by social or religious clubs to their members. The EU is also treated as a club good.

Public goods with benefits restricted to a specific group may be considered club goods. For example, expenditures that benefit all of the children in a household but not the adults. The existence of club goods for kids may offset the effects of sibling competition for private investments in larger families.

Analyzing Ultra-Orthodox Jews in Israel, economist Eli Berman writes:

Religious prohibitions can be understood as an extreme tax on secular activity outside the club which substitutes for charitable activity within the club. A religious community lacking tax authority or unable to sufficiently subsidize charitable activity may choose prohibitions to increase this activity among members. Sabbath observance and dietary restrictions, for instance, can be rationalized with that approach. In this context the increased stringency of religious practice is an efficient communal response to rising real wages and to increased external subsidies.

James M. Buchanan developed club theory (the study of club goods in economics) in his 1965 paper, "An Economic Theory of Clubs". He wrote that there was an "awesome Samuelson gap between the purely private and purely public good". This gap contained goods that were excludable but shared by more people than typically share a private good but fewer people than typically share a public good. The goal of his theory was to address the question of determining the "size of the most desirable cost and consumption sharing arrangement".

...
Wikipedia