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Endogenous market structure and the cooperative firm

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  • Hueth, Brent
  • Moschini, GianCarlo

Abstract

When the threat of entry by followers includes cooperative firms, the maximum fixed cost that a profit maximizing leader can endure is endogenous. The aggressive strategy required for entry-deterrence curtails the leader’s expected profit and can discourage its initial entry. In such circumstances a cooperative firm may yet be viable, despite having a cost handicap and no first-mover advantage.

Suggested Citation

  • Hueth, Brent & Moschini, GianCarlo, 2014. "Endogenous market structure and the cooperative firm," Economics Letters, Elsevier, vol. 124(2), pages 283-285.
    • Handle: RePEc:eee:ecolet:v:124:y:2014:i:2:p:283-285
    DOI: 10.1016/j.econlet.2014.06.003
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    References listed on IDEAS

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    1. Richard J. Sexton & Terri A. Sexton, 1987. "Cooperatives as Entrants," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 581-595, Winter.
    2. Innes, Robert & Sexton, Richard J., 1993. "Customer coalitions, monopoly price discrimination and generic entry deterrence," European Economic Review, Elsevier, vol. 37(8), pages 1569-1597, December.
    3. Federico Etro, 2008. "Stackelberg Competition with Endogenous Entry," Economic Journal, Royal Economic Society, vol. 118(532), pages 1670-1697, October.
    4. Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 12(4), pages 53-69, Winter.
    5. Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, March.
    6. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    7. Federico Etro, 2014. "The Theory Of Endogenous Market Structures," Journal of Economic Surveys, Wiley Blackwell, vol. 28(5), pages 804-830, December.
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    Cited by:

    1. Panos Fousekis, 2016. "Member Coordination Costs and Spatial Entry Deterrence in a Mixed Duopsony with a Cooperative," Spatial Economic Analysis, Taylor & Francis Journals, vol. 11(3), pages 340-354, July.

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    More about this item

    Keywords

    Cooperatives; Endogenous entry; Entry deterrence; Nonconvexity;
    All these keywords.

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • P13 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises

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