Economies of Scope and Multiproduct Clubs

Abstract

This article addresses the potential optimality of joint provision of multiple public goods when the joint cost function of such goods exhibits economies of scope. On one hand, the joint provision of public goods in multiproduct clubs leads to cost savings under economies of scope. However, there is an efficiency loss from such clubs because consumption group sizes cannot be set individually for each good. The article analyzes these costs and benefits and derives conditions under which multiproduct clubs are desirable.