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Competitive Equilibrium of an Industry with Labor Managed Firms and Price Risk

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Author Info

  • Bar-Shira, Ziv
  • Finkelshtain, Israel
  • Simhon, Avi

Abstract

This paper studies the effect of output-price uncertainty in an industry comprised of labor-managed firms (LMFs) in which the number of LMFs and their membership are determined endogenously. The exit condition for a risk-averse LMF member is formulated and the effect of various economic variables on the equilibrium quantities and prices are examined. We find that the equilibrium in our setting is similar to the one that emerges in a ‘capitalistic’ economy where firms are owned by profit-maximizing agents. However, the effects of increases in risk and risk aversion differ from those found in a short-run analysis of a single LMF.

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File URL: http://purl.umn.edu/44675
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Bibliographic Info

Article provided by Hebrew University, Center for Agricultural Economic Research in its journal Journal of Rural Cooperation.

Volume (Year): 34 (2006)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:ags:jlorco:44675

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Related research

Keywords: Labor Managed Firms; Cooperatives; Price Risk; Risk Aversion; Long-Run.; Agribusiness;

References

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  1. Ira Horowitz, 1992. "Membership size in the educable cooperative facing uncertain demand," Journal of Economics, Springer, vol. 55(1), pages 65-75, February.
  2. Haruna, Shoji, 1988. "Industry equilibrium with uncertainty and labor-managed firms," Economics Letters, Elsevier, vol. 26(1), pages 83-88.
  3. Bonin, John P., 1980. "On the theory of the competitive labor-managed firm under price uncertainty: A correction," Journal of Comparative Economics, Elsevier, vol. 4(3), pages 331-337, September.
  4. Podivinsky, Jan & Stewart, Geoff, 2003. "Why are labour-managed firms so rare? An analysis of entry using UK panel data," Discussion Paper Series In Economics And Econometrics 0402, Economics Division, School of Social Sciences, University of Southampton.
  5. Nava Kahana & Jacob Paroush, 1984. "A Multi-factor Labor-managed Firm under Price Uncertainty," Eastern Economic Journal, Eastern Economic Association, vol. 10(1), pages 23-29, Jan-Mar.
  6. Diamond, Peter A. & Stiglitz, Joseph E., 1974. "Increases in risk and in risk aversion," Journal of Economic Theory, Elsevier, vol. 8(3), pages 337-360, July.
  7. Appelbaum, Elie & Katz, Eliakim, 1986. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium," American Economic Review, American Economic Association, vol. 76(3), pages 524-29, June.
  8. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
  9. Horowitz, Ira, 1982. "More on the theory of the competitive labor-managed firm under price uncertainty," Journal of Comparative Economics, Elsevier, vol. 6(3), pages 269-272, September.
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