Exclusivity of Groups in Contests

I analyse a group contest in which groups decide over two dimensions of membership-exclusivity: whether a member is allowed to join the group at all, and whether this member is allowed to join another group as well. If the prize is mostly private, group leaders do not offer membership in equilibrium. If the prize is mostly public or the elasticity of marginal effort cost high, they offer exclusive membership. Membership commitment, membership fees, and the introduction of a third group all lead to the emergence of equilibria with endogenous non-exclusive membership. A contest designer interested in maximising effort would like to prohibit non-exclusive membership and allow exclusive membership only if groups are more effective than singletons