Egalitarianism and meritocracy are two competing principles to distribute the joint benefi…ts of cooperation. We examine the consequences of letting members of society decide by vote among those two principles, in a context where groups of a certain size must be formed, in order for individuals to become productive. Our setup induces a hedonic game of coalition formation. We study the existence of core stable partitions (organizational structures) of this game. For societies with three types of agents we provide necessary and sufficient conditions under which core stable partitions will exist, and we identify the types of stable organizational structures that will arise. We conclude that the inability of voters to commit to one distributional rule or another is a potential source of instability. But we also prove that, when stable organizational structures exist, they may be rich in form, and quite different than those predicted by alternative models of group formation. In particular, non-segregated groups may arise within core stable structures. Stability is also compatible with the coexistence of meritocratic and egalitarian groups. We also remark that changes in society can alter their distributional regimes and in‡uence their ability to compete.
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