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Capital procurement of a consumer cooperative: Role of the membership market

  • Mikami, Kazuhiko
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    Cooperative firms are commonly thought to be financially weak and unable to flourish in the market economy. This paper addresses the idea that a consumer cooperative issues a membership, which represents an ownership share in the cooperative, as a method of procuring equity capital. It then shows that, in theory, consumer cooperatives are not necessarily financially weaker than investor-owned firms in the presence of a membership market. This implies that the consumer cooperative is potentially a promising alternative to the investor-owned firm when the latter type of firm induces serious market failure in the product market.

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    Article provided by Elsevier in its journal Economic Systems.

    Volume (Year): 34 (2010)
    Issue (Month): 2 (June)
    Pages: 178-197

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    Handle: RePEc:eee:ecosys:v:34:y:2010:i:2:p:178-197
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    1. Kazuhiko Mikami, 2007. "Asymmetric Information and the Form of Enterprise: Capitalist Firms and Consumer Cooperatives," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(2), pages 297-312, June.
    2. Tirole, Jean, 1999. "Corporate Governance," CEPR Discussion Papers 2086, C.E.P.R. Discussion Papers.
    3. Klaus M. Schmidt, 1995. "Incomplete Contracts and Privatization," Discussion Paper Serie A 480, University of Bonn, Germany.
    4. Golbe, Devra L, 1983. "Product Safety in a Regulated Industry: Evidence from the Railroads," Economic Inquiry, Western Economic Association International, vol. 21(1), pages 39-52, January.
    5. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
    6. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    7. Manning, Alan, 1989. "An Asymmetric Information Approach to the Comparative Analysis of Participatory and Capitalist Firms," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 312-26, April.
    8. Gregory Dow, 1996. "Replicating Walrasian equilibria using markets for membership in labor-managed firms," Review of Economic Design, Springer, vol. 2(1), pages 147-162, December.
    9. Ben-Ner, Avner & Jun, Byoung, 1996. "Employee Buyout in a Bargaining Game with Asymmetric Information," American Economic Review, American Economic Association, vol. 86(3), pages 502-23, June.
    10. 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.
    11. Sertel, Murat R., 1991. "Workers' enterprises in imperfect competition," Journal of Comparative Economics, Elsevier, vol. 15(4), pages 698-710, December.
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