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Takeovers and Cooperatives

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Author Info
Frank Milne () (Queen's University)
David Kelsey (University of Exeter)

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Abstract

If 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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File URL: http://www.econ.queensu.ca/working_papers/papers/qed_wp_1113.pdf
File Format: application/pdf
File Function: First version 2006
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Publisher Info
Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1113.

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Length: 20 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:qed:wpaper:1113

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Related research
Keywords: corporate governance; co-operative; take-over; free-rider;

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Find related papers by JEL classification:
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Erkan YalÁin & Thomas I. Renstr–m, 2003. "Endogenous Firm Objectives," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(1), pages 67-94, 01. [Downloadable!] (restricted)
  2. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring. [Downloadable!] (restricted)
  3. C. Edward Fee & Charles J. Hadlock & Shawn Thomas, 2006. "Corporate Equity Ownership and the Governance of Product Market Relationships," Journal of Finance, American Finance Association, vol. 61(3), pages 1217-1251, 06. [Downloadable!] (restricted)
  4. Frank Milne & David Kelsey, 2005. "Externalities, Monopoly and the Objective Function of the Firm," Working Papers 1078, Queen's University, Department of Economics. [Downloadable!]
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  5. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto. [Downloadable!]
  6. Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press, vol. 12(4), pages 53-69, Winter.
    Other versions:
  7. Roemer, John E, 1993. " Would Economic Democracy Decrease the Amount of Public Bads?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 95(2), pages 227-38.
    Other versions:
  8. Jeffrey W. Allen & Gordon M. Phillips, 2000. "Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships," Journal of Finance, American Finance Association, vol. 55(6), pages 2791-2815, December. [Downloadable!] (restricted)
  9. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen. [Downloadable!] (restricted)
  10. Farrell, Joseph, 1985. "Owner-consumers and efficiency," Economics Letters, Elsevier, vol. 19(4), pages 303-306. [Downloadable!] (restricted)
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  11. Julian Franks & Colin Mayer & Stefano Rossi, 2003. "Ownership: Evolution and Regulation," OFRC Working Papers Series 2003fe14, Oxford Financial Research Centre. [Downloadable!]
  12. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December. [Downloadable!] (restricted)
    Other versions:
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