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‘Just one of us’: consumers playing oligopoly in mixed markets

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  • Marco Marini

    ()

  • Alberto Zevi

    ()

Abstract

Consumer cooperatives represent a highly successful example of democratic form of enterprises operating in developed countries. They are usually medium to large-scale companies competing with the profit-maximizing firms in the retail sector. This paper describes this situation as a mixed oligopoly in which consumer cooperatives maximize the utility of consumer-members and, in return, refund them with a share of the profits corresponding to the ratio of their individual spending to the cooperative's total sales. We show that when consumers possess quasi-linear preferences over a bundle of symmetrically differentiated goods, and companies operate using a linear technology, the presence of consumer cooperatives positively affects total industry output, as well as welfare. The effect of cooperatives on welfare proves to be even more significant when goods are either complements or highly differentiated, and when competition is à la Cournot rather than à la Bertrand.

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Bibliographic Info

Article provided by Springer in its journal Journal of Economics.

Volume (Year): 104 (2011)
Issue (Month): 3 (November)
Pages: 239-263

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Handle: RePEc:kap:jeczfn:v:104:y:2011:i:3:p:239-263

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Web page: http://www.springerlink.com/link.asp?id=108909

Related research

Keywords: Consumer cooperatives; Profit-maximizing firms; Mixed oligopoly; L13; L21; L22; L31; L33; L81; P13;

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References

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Citations

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Cited by:
  1. Michael Kopel & Marco A. Marini, 2012. "Optimal Compensation Structure in Consumer Cooperatives under Mixed Oligopoly," DIS Technical Reports, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza" 2012-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  2. Michael Kopel & Marco Marini, 2013. "Strategic Delegation In Consumer Cooperatives Under Mixed Oligopoly," Working Papers 1306, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2013.
  3. Marco Marini & Paolo Polidori & Desiree Teobaldelli & Alberto Zevi, 2014. "Welfare enhancing coordination in consumer cooperatives under mixed oligopoly," DIAG Technical Reports 2014-10, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  4. Kopel, Michael & Brand, Björn, 2012. "Socially responsible firms and endogenous choice of strategic incentives," Economic Modelling, Elsevier, vol. 29(3), pages 982-989.
  5. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.

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