IDEAS home Printed from https://ideas.repec.org/a/bla/annpce/v86y2015i3p505-527.html
   My bibliography  Save this article

Welfare Enhancing Coordination In Consumer Cooperatives Under Mixed Oligopoly

Author

Listed:
  • Marco A. MARINI
  • Paolo POLIDORI
  • Desiree TEOBALDELLI
  • Alberto ZEVI

Abstract

The recent globalization of world economies has led the retail markets of developed countries towards increasing levels of integration and strategic interdependence. A non negligible share of retail and food markets is currently served by co-operative societies. Consistently with this trend, the consumer cooperatives have recently experienced increasing levels of integration. The main aim of this paper is to study the welfare effects of coordination among consumer cooperatives competing in quantities in a mixed oligopoly against profit-maximizing firms. We show that, in absence of agency problems, under increasing or constant returns to scale a higher output coordination of the consumer cooperatives does not affect the total welfare as long as a nonnegative profit constraint holds in these firms. On the other hand, under decreasing returns to scale, the consumer cooperatives contribute more to social welfare when acting on behalf of all consumers. This is because, by coordinating consumers’ preferences, these firms can reduce their market output, thus helping the market to come closer to the first best. All together these results seem to provide an argument in favour of the recent process of integration involving consumer cooperatives in many developed countries.Journal: Annals of Public and Cooperative Economics

Suggested Citation

  • Marco A. MARINI & Paolo POLIDORI & Desiree TEOBALDELLI & Alberto ZEVI, 2015. "Welfare Enhancing Coordination In Consumer Cooperatives Under Mixed Oligopoly," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 505-527, September.
  • Handle: RePEc:bla:annpce:v:86:y:2015:i:3:p:505-527
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/apce.12059
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Richard J. Sexton & Terri A. Sexton, 1987. "Cooperatives as Entrants," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 581-595, Winter.
    2. Vita, Michael G & Sacher, Seth, 2001. "The Competitive Effects of Not-for-Profit Hospital Mergers: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 63-84, March.
    3. Mikami, Kazuhiko, 2003. "Market power and the form of enterprise: capitalist firms, worker-owned firms and consumer cooperatives," Journal of Economic Behavior & Organization, Elsevier, vol. 52(4), pages 533-552, December.
    4. David Kelsey & Frank Milne, 2010. "Takeovers and cooperatives: governance and stability in non-corporate firms," Journal of Economics, Springer, vol. 99(3), pages 193-209, April.
    5. Feng, L. & Hendrikse, G.W.J., 2011. "Chain Interdependencies, Measurement Problems, and Efficient Governance Structure: Cooperatives versus Publicly Listed Firms," ERIM Report Series Research in Management ERS-2011-001-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    6. Michael Kopel & Marco A. Marini, 2012. "Optimal Compensation Structure in Consumer Cooperatives under Mixed Oligopoly," DIS Technical Reports 2012-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    7. Hart, Oliver & Moore, John, 1998. "Cooperatives vs. outside ownership," LSE Research Online Documents on Economics 19360, London School of Economics and Political Science, LSE Library.
    8. Fulton, Murray E., 1989. "Cooperatives in Oligopolistic Industries: The Western Canadian Fertilizer Industry," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 4.
    9. Albaek, Svend & Schultz, Christian, 1998. "On the relative advantage of cooperatives," Economics Letters, Elsevier, vol. 59(3), pages 397-401, June.
    10. Richard J. Sexton, 1986. "The Formation of Cooperatives: A Game-Theoretic Approach with Implications for Cooperative Finance, Decision Making, and Stability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 214-225.
    11. repec:oup:jcomle:v:7:y:2011:i:1:p:69-92. is not listed on IDEAS
    12. Peter Helmberger & Sidney Hoos, 1962. "Cooperative Enterprise and Organization Theory," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 44(2), pages 275-290.
    13. Konstantinos Giannakas & Murray Fulton, 2005. "Process Innovation Activity in a Mixed Oligopoly: The Role of Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 406-422.
    14. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    15. Marco Marini & Alberto Zevi, 2011. "‘Just one of us’: consumers playing oligopoly in mixed markets," Journal of Economics, Springer, vol. 104(3), pages 239-263, November.
    16. Farrell, Joseph, 1985. "Owner-consumers and efficiency," Economics Letters, Elsevier, vol. 19(4), pages 303-306.
    17. Roger Spear, 2004. "Governance in Democratic Member-Based Organisations," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(1), pages 33-60, March.
    18. Richards, Timothy J. & Klein, Kurt K. & Walburger, Allan M., 1998. "Principal-Agent Relationships in Agricultural Cooperatives: An Empirical Analysis from Rural Alberta," Journal of Cooperatives, NCERA-210, vol. 13.
    19. Goering, Gregory E., 2008. "Welfare impacts of a non-profit firm in mixed commercial markets," Economic Systems, Elsevier, vol. 32(4), pages 326-334, December.
    20. Mikami, Kazuhiko, 2010. "Capital procurement of a consumer cooperative: Role of the membership market," Economic Systems, Elsevier, vol. 34(2), pages 178-197, June.
    21. Murray Fulton & Konstantinos Giannakas, 2001. "Organizational Commitment in a Mixed Oligopoly: Agricultural Cooperatives and Investor-Owned Firms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1258-1265.
    22. David Kelsey & Frank Milne, 2008. "Imperfect Competition and Corporate Governance," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 10(6), pages 1115-1141, December.
    23. Pinhas Zusman, 1982. "Group Choice in an Agricultural Marketing Co-operative," Canadian Journal of Economics, Canadian Economics Association, vol. 15(2), pages 220-234, May.
    24. Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 1-18, February.
    25. V. James Rhodes, 1983. "The Large Agricultural Cooperative as a Competitor," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(5), pages 1090-1095.
    26. John M. Crespi & Tina L. Saitone & Richard J. Sexton, 2012. "Competition in U.S. Farm Product Markets: Do Long-Run Incentives Trump Short-Run Market Power?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(4), pages 669-695.
    27. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
    28. Chris Cornforth, 2004. "The Governance of cooperatives and mutual associations: a paradox perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(1), pages 11-32, March.
    29. Jens Prüfer, 2011. "Competition And Mergers Among Nonprofits," Journal of Competition Law and Economics, Oxford University Press, vol. 7(1), pages 69-92.
    30. Laura T. Starks, 2009. "EFA Keynote Speech: "Corporate Governance and Corporate Social Responsibility: What Do Investors Care about? What Should Investors Care about?"," The Financial Review, Eastern Finance Association, vol. 44(4), pages 461-468, November.
    31. 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.
    32. Michael Kopel & Marco Marini, 2014. "Strategic delegation in consumer cooperatives under mixed oligopoly," Journal of Economics, Springer, vol. 113(3), pages 275-296, November.
    33. Michael E. Sykuta & Michael L. Cook, 2001. "A New Institutional Economics Approach to Contracts and Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1273-1279.
    34. Berit Tennbakk, 1995. "Marketing Cooperatives In Mixed Duopolies," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(1), pages 33-45.
    35. Arthur L. Bekenstein, 1943. "A Theoretical Analysis of Consumer Co-Operatives: The Managerial Problem," Journal of Political Economy, University of Chicago Press, vol. 51, pages 251-251.
    36. Richard J. Sexton, 1990. "Imperfect Competition in Agricultural Markets and the Role of Cooperatives: A Spatial Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(3), pages 709-720.
    37. Michael Kopel & Marco Marini, 2014. "Erratum to: Strategic delegation in consumer cooperatives under mixed oligopoly," Journal of Economics, Springer, vol. 113(3), pages 297-297, November.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Cho, Sumi & Lee, Sang-Ho, 2017. "Subsidization Policy on the Social Enterprise for the Underprivileged," MPRA Paper 84411, University Library of Munich, Germany.
    2. Tomori, Françeska, 2018. "Mixed Duopoly in Education with Vouchers," Working Papers 2072/306548, Universitat Rovira i Virgili, Department of Economics.

    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:annpce:v:86:y:2015:i:3:p:505-527. 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1370-4788 .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.