Ownership Structure and Endogenous Quality Choice: Cooperatives versus Investor-Owned Firms
This paper examines how ownership structure affects endogenous quality choice and the subsequent equilibrium outcomes. Investor owned firms (IOFs) and producer cooperatives (COOPs) are analyzed within a duopoly framework including a primary and a secondary level. The firms play a two-stage game, first simultaneously choosing the level of quality to produce and then compete in prices. It is shown that if the cost of quality at primary level is fixed, and/or variable exhibiting non-constant returns to scale, firms can have a structural cost advantage due to ownership structure in addition to the high-quality advantage identified in the previous literature.In the case of a fixed cost of quality at primary level, it is shown that although IOFs charge higher prices they generate a larger consumer surplus than COOPs by marketing higher qualities. Cooperatives generate a larger producer surplus while the market share of the high-quality good is independent of ownership structure. In the case of a variable cost of quality at primary level, a cooperative firm possesses a structural cost advantage which is used to market larger quantities of higher levels of quality generating larger profits, larger consumer surplus and larger social welfare. Policy implications of the different structures are discussed.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 3 (2005)
Issue (Month): 2 (December)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/jafio|
When requesting a correction, please mention this item's handle: RePEc:bpj:bjafio:v:3:y:2005:i:2:n:8. 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: (Peter Golla)
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.