Takeovers and cooperatives: governance and stability in non-corporate firms

Abstract

If consumers wholly or partially control a …rm with market power they will charge less than the pro…t maximizing price. Starting at the usual monopoly price, a small price reduction will have a second order e¤ect on pro…ts but a …rst order e¤ect on consumer surplus. Despite this desirable static result, it has been argued that cooperatives are vulnerable to take-over by outsiders who will run them as for-pro…t businesses. This paper studies takeovers of cooperatives. We argue that there will not be excessive takeovers of cooperatives due to the Grossman-Hart problem of free riding during takeovers.

Welfare Enhancing Coordination in Consumer Cooperatives Under Mixed Oligopoly

“…As a result, for this type of cooperative, the average cost pricing rule , widely known in the literature on consumer cooperatives (Helmberger and Hoos , Anderson et al , Ireland and Law ), also holds under mixed oligopoly. This depends on the fact that, whereas a price reduction has a second‐order effect on the shares of profit of individual consumers, it has a first‐order effect on their surplus (see also Kelsey and Milne , , Marini and Zevi ). However, we show now that this result does not necessarily hold if each cooperative acts coordinately to maximize the joint utilities of all consumers (see also Enke () and Farrell () for the monopoly case).…”

The Big Society, values and co-operation

“…Most of the published academic research on co-operatives, particularly in the last few years, has been economic in orientation, discussing finance, governance and control (see Cremer, 2009;Kelsey and Milne, 2010;Siebert and Lyford, 2009;Valentinov, 2007), much of it focused on agricultural co-operatives or very large co-operatives such as Mondragon in Spain (e.g. Lopez et al, 2009).…”