Cooperatives vs. outside ownership
We are concerned with the design of a constitution for a firm - an ex ante contract which assigns residual rights of control (and possibly residual income rights) without reference to the issue to be decided. We focus attention on two polar constitutions: non-profit cooperatives and outside ownership. In the former, ownership is shared among a group of consumers on a one member, one vote basis. In the latter, all control rights and rights to residual income are allocated to an outsider. Ex post, agents are assumed to have asymmetric information, which rules out recontracting. We have two main results. First, in the case of perfect competition, an outside owner achieves the first-best; a cooperative typically does not, because the rent from any cost advantage relative to the market is used to shield members from competitive pressure, and the median voter's preferences may not reflect average preferences. Second, in the case where the members of a cooperative have common preference orderings they unanimously vote for the first-best; an outsider owner typically makes inefficient decisions, tailored to the marginal rather than to the average consumer.
|Date of creation:||Jan 1998|
|Date of revision:|
|Contact details of provider:|| Postal: LSE Library Portugal Street London, WC2A 2HD, U.K.|
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/
More information through EDIRC
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.:
- George J. Mailath & Andrew Postlewaite, 1990. "Asymmetric Information Bargaining Problems with Many Agents," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 351-367.
- Abhijit Banerjee & Dilip Mookherjee & Kaivan Munshi & Debraj Ray, 1997. "Inequality, control Rights and Rent Seeking - A Theoretical and Empirical Analysis of Sugar Cooperatives in Maharashtra," Boston University - Institute for Economic Development 80, Boston University, Institute for Economic Development.
- Wolfgang Pesendorfer & David Levine, 1992.
"When are Agents Negligible?,"
1018, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Ostroy, Joseph M., 1980.
"The no-surplus condition as a characterization of perfectly competitive equilibrium,"
Journal of Economic Theory,
Elsevier, vol. 22(2), pages 183-207, April.
- Joseph M. Ostroy, 1977. "The No-Surplus Condition as a Characterization of Perfectly Competitive Equilibrium," UCLA Economics Working Papers 090, UCLA Department of Economics.
- Joseph M. Ostroy, 1978. "The No-Surplus Condition as a Characterization of Perfectly Competitive Equilibrium," UCLA Economics Working Papers 139, UCLA Department of Economics.
- Grossman, Sanford J. & Hart, Oliver D., 1986.
"The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration,"
3450060, Harvard University Department of Economics.
- Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
- Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
- Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers 70, C.E.P.R. Discussion Papers.
- Hart, Oliver D. & Moore, John, 1990.
"Property Rights and the Nature of the Firm,"
3448675, Harvard University Department of Economics.
- 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.
- Oliver Hart & John Moore, 1996. "The Governance of Exchanges: Members' Co-operatives Versus Outside Ownership," STICERD - Theoretical Economics Paper Series /1996/292, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Makowski, Louis, 1983. "Competition and Unanimity Revisited," American Economic Review, American Economic Association, vol. 73(3), pages 329-39, June.
- Yoram Barzel & Tim R. Sass, 1990. "The Allocation of Resources by Voting," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 745-771.
- Rob, Rafael, 1989.
"Pollution claim settlements under private information,"
Journal of Economic Theory,
Elsevier, vol. 47(2), pages 307-333, April.
- Rob, R., 1988. "Pollution Claim Settlements Under Private Information," Papers 19-88, Tel Aviv.
- Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-320, September.
- Ilya Segal., 1997. "Contracting with Externalities," Economics Working Papers 97-259, University of California at Berkeley.
- Holmstrom, Bengt & Myerson, Roger B, 1983.
"Efficient and Durable Decision Rules with Incomplete Information,"
Econometric Society, vol. 51(6), pages 1799-819, November.
- Bengt Holmstrom & Roger B. Myerson, 1981. "Efficient and Durable Decision Rules with Incomplete Information," Discussion Papers 495, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- William R. Emmons & Willi Mueller, 1997. "Conflict of interest between borrowers and lenders in credit co- operatives: the case of German co-operative banks," Working Papers 1997-009, Federal Reserve Bank of St. Louis.
- Craig, Ben & Pencavel, John, 1992. "The Behavior of Worker Cooperatives: The Plywood Companies of the Pacific Northwest," American Economic Review, American Economic Association, vol. 82(5), pages 1083-105, December.
- Svend Albæk & Christian Schultz, 1997.
"One cow, one vote?,"
CIE Discussion Papers
1997-01, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Michael Kremer, 1997. "Why are Worker Cooperatives So Rare?," NBER Working Papers 6118, National Bureau of Economic Research, Inc.
- Segal, Ilya, 1997. "Contracting with Externalities," Department of Economics, Working Paper Series qt90c168j1, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Eric Maskin & Jean Tirole, 1997. "Unforseen Contingencies, Property Rights, and Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1796, Harvard - Institute of Economic Research.
- Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
When requesting a correction, please mention this item's handle: RePEc:ehl:lserod:19360. 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: (LSERO Manager)
If references are entirely missing, you can add them using this form.