Takeovers and Cooperatives
AbstractIf consumers wholly or partially control a firm with market power they will charge less than the profit maximising price. Starting at the usual monopoly price, a small price reduction will have a second order e¤ect on profits but a first order effect 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-profit businesses. This paper studies takeovers of cooperatives. We argue that cooperatives are in fact quite stable due to the Grossman-Hart problem of free riding during takeovers.
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Bibliographic InfoPaper provided by Queen's University, Department of Economics in its series Working Papers with number 1113.
Length: 20 pages
Date of creation: Aug 2006
Date of revision:
corporate governance; co-operative; take-over; free-rider;
Find related papers by JEL classification:
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-23 (All new papers)
- NEP-BEC-2007-01-23 (Business Economics)
- NEP-IND-2007-01-23 (Industrial Organization)
- NEP-SOC-2007-01-23 (Social Norms & Social Capital)
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