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Stable producer co-operatives in competitive markets

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  • Marini, Marco

Abstract

An argument often adopted to explain the relatively scarce presence of Producer Co-operatives (PCs) in Western capitalist economies is the instability that may affect this type of firm during the positive phases of the business cycle. In a nutshell the argument is that in profitable industries PCs can have an incentive to hire fixed-wage workers to replace the relatively more expensive firm's members. The paper shows that this phenomenon can fail to hold in very competitive and low barrier-to-entry markets in which, potentially, dismissed members have a chance to set up new firms. Furthermore, since some basic results on PC's stability are due to the assumption of an exogenous equilibrium wage as opposed to an endogenous PC's payoff, the paper attempts to remove this assumption. Two main insights are thus provided. Firstly, that workers possess an incentive to set up PCs only under specific circumstances. Secondly, that once PCs enter a market, conditions exist under which they are stable against the temptation to dismiss members to hire fixed-wage workers.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 31925.

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Date of creation: 1998
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Handle: RePEc:pra:mprapa:31925

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Related research

Keywords: Producer Co-operatives; Wages; Self-employment;

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  1. Derek C. JONES, 1975. "British Producer Cooperatives And The Views Of The Webbs On Participation And Ability To Survive," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 46(1), pages 23-44, 01.
  2. Marini Marco & Zevi Alberto, 1998. "The Reform of the Western European Co-operative Legislation: a First Assessment from a Bargaining Point of View," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 83-104.
  3. Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-320, September.
  4. Marco, Marini, 1997. "Managers Compensation and Collusive Behaviour under Cournot Oligopoly," MPRA Paper 31871, University Library of Munich, Germany.
  5. Ben-Ner, Avner, 1988. "Comparative empirical observations on worker-owned and capitalist firms," International Journal of Industrial Organization, Elsevier, vol. 6(1), pages 7-31, March.
  6. Ben-ner, Avner, 1984. "On the stability of the cooperative type of organization," Journal of Comparative Economics, Elsevier, vol. 8(3), pages 247-260, September.
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