Allocative and distributional effects of a monopolistic cooperative firm in a capitalist economy

Cooperative Firms and the Crisis: Evidence From Some Italian Mixed Oligopolies

“…Such celebrated result is well‐known as the ‘perverse effect’ of the cooperative firm. A similar result has been proved also under monopoly by Gal‐Or et al () and Ireland and Law () . We may summarize this stream of literature by saying that the cooperative behaviour (i.e., maximization of profit per worker) in ‘extreme’ market structures (perfect competition and monopoly) yields perverse effects…”

“…Such celebrated result is well-known as the 'perverse effect' of the cooperative firm. A similar result has been proved also under monopoly by Gal-Or et al (1980) and Ireland and Law (1982). 9 We may summarize this stream of literature by saying that 6 According to Cecop statistics, Italy leads the ranking with more than 40,000 co-ops followed by Spain (about 24,000) and France (about 21,000).…”

Strategic Investment in a Labour‐managed Duopoly

“…Given homothetic technology, Ireland and Law (1982) show that a (profitable) PM monopoly produces greater output than an LM monopoly. Gal‐Or et al (1980) obtain the same result on condition that labour is a non‐inferior input. This paper also identifies the same result making a comparison between firm behaviour in an LM duopoly and that in a PM duopoly.…”

“…When Gal‐Or et al (1980) establish that monopolistic LM firms produce a smaller output than PM monopolies, they pay attention to the expansion elasticity of labour with respect to output in the context of the LM firm and then identify the dual role of labour within its theoretical framework. This paper also makes use of the concept of the expansion elasticity of labour with respect to output, thereby defining the dependence of the slope of an LM duopolist's reaction function in the second stage on the magnitude of the expansion elasticity of labour with respect to output in a two‐stage game model with capital commitment.…”

“…This means that because the strategic effect for the latter is negative, it also would have an incentive to reduce its own level of capital stock in the first stage. As stated in Gal‐Or et al (1980), labour plays a dual role in the context of an LM firm. In this case, because the labour‐expansion elasticity is greater than one, a higher output implies a large increase in the labour input, which itself lowers the value of the objective function defined as income per worker.…”