Advanced Search
MyIDEAS: Login

Organizational structure and the endogeneity of cost : cooperatives, for-profit firms and the cost of procurement


Author Info

  • Bontems, P.
  • Fulton, M.


In this paper, we show formally that cooperatives can possess an informational -and hence cost- advantage compared to For Profit Firms (FPFs). Hence the standard practice of modeling the cooperative and the FPF as having identical cost structures appears to be theoretically unsound. The cooperative cost -and hence production efficiency- advantage is directly linked to the goal alignment between the cooperative and its members, and is influenced by the extent of income redistribution betwen members and the degree of rent seeking that takes place in the organization. When there is no aversion to income inequality, the members produce at their first best levels. However, as aversion to inequality rises, the production profile of the members converges to the production profile generated when the members face an FPF. Regarding rent seeking if the more (less) efficient members are able to get their profits valued more, total output is increased (devreased). As a consequence, consumers may benefit from the lobbying that occurs inside a cooperative where the powerful members are the most efficient agents. ...French Abstract : Les auteurs montrent formellement dans cet article que les coopératives peuvent résoudre des problèmes d'agences internes à moindre coût que les firmes possédées par des investisseurs extérieurs. L'hypothèse standard consistant à retenir les mêmes structures de coûts pour les deux types d'organisation apparaît alors comme étant infondée d'un point de vue théorique. L'avantage de la forme coopérative en terme d'efficience réside dans le plus grand degré de congruence entre le manager et les membres. Cet avantage est également influencé par l'étendue de la redistribution entre membres opérée au sein de la coopérative et la distribution des pouvoirs au sein de la structure. La production de premier rand est obtenue lorsqu'il y a absence d'aversion pour l'inégalité au sein de la coopérative. Si le degré d'aversion pour l'inégalité augmente alors le profil de production converge vers celui optimal au sein d'une firme possédée par des investisseurs extérieurs. En ce qui concerne l'effet de la distribution du pouvoir politique, si les membres les plus (moins) efficaces sont à même d'obtenir une plus grande valorisation collective de leur revenu, alors la production globale est accrue (diminuée). Ainsi, les consommateurs peuvent bénéficier du lobbying interne à la coopérative lorsque les membres les plus puissants et donc les plus susceptibles d'influencer les décisions sont aussi les plus efficients du point de vue de la production.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Our checks indicate that this address may not be valid because: 404 Not Found ( [301 Moved Permanently]--> If this is indeed the case, please notify (RAYNAL Helene)
Download Restriction: no

Bibliographic Info

Paper provided by French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse) in its series Economics Working Paper Archive (Toulouse) with number 200507.

as in new window
Length: 40 p.
Date of creation: 2005
Date of revision:
Handle: RePEc:rea:inrawp:200507

Contact details of provider:
Postal: INRA ESR - BP27 - 31326 Castanet Tolosan cedex - France
Fax: (33)
Web page:
More information through EDIRC

Order Information:
Postal: INRA ESR - BP27 - 31326 Castanet Tolosan cedex - France

Related research


Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


No references listed on IDEAS
You can help add them by filling out this form.


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Lemeilleur, Sylvaine & Bignebat, Celine & Cordon, J.M., 2007. "Marketing Cooperative vs Producer's Agent: The Turkish Dilemma in Modern FFV Market," 103rd Seminar, April 23-25, 2007, Barcelona, Spain 9405, European Association of Agricultural Economists.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:rea:inrawp:200507. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RAYNAL Helene).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.