Abstract

We consider the problem of producing an impure public good in various jurisdictions formed through the strategic decisions of agents. Our environment inherits two well-known problems: Under individual decisions, there is a tension between stability and efficiency; Under coalitional decisions, stable jurisdiction structures may fail to exist. The solution, we propose is the use of membership property rights: When a move among jurisdictions is subject to the approval of the agents whom it affects, coalitionally stable jurisdiction structures coincide with those which are efficient.