Adverse Selection in Clubs and the Demand for Nondiscriminatory Equal Access Policies vs. Quotas.

Because of very concrete knowledge of race and sex discrimination, a particularly important class of peer group effects arise when agents of one type want to associate with agents of another type, while agents of that other type prefer association among themselves. Competitive provision in the presence of this king of peer group effect is the focus of this paper. Charges of unfair pricing and access limitation have often been met by governmental policies banning price discrimination between types and exclusionary restrictions. The purpose of this paper is to analyze explicitly the characteristics of competitive equilibria that might emerge under these kinds of policy controls, and the extent to which these equilibria can generate demands for inclusionary quotas.