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Stable producer co-operatives in competitive markets

Author

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  • Marini, Marco

Abstract

An argument often adopted to explain the relatively scarce presence of Producer Co-operatives (PCs) in Western capitalist economies is the instability that may affect this type of firm during the positive phases of the business cycle. In a nutshell the argument is that in profitable industries PCs can have an incentive to hire fixed-wage workers to replace the relatively more expensive firm's members. The paper shows that this phenomenon can fail to hold in very competitive and low barrier-to-entry markets in which, potentially, dismissed members have a chance to set up new firms. Furthermore, since some basic results on PC's stability are due to the assumption of an exogenous equilibrium wage as opposed to an endogenous PC's payoff, the paper attempts to remove this assumption. Two main insights are thus provided. Firstly, that workers possess an incentive to set up PCs only under specific circumstances. Secondly, that once PCs enter a market, conditions exist under which they are stable against the temptation to dismiss members to hire fixed-wage workers.

Suggested Citation

  • Marini, Marco, 1998. "Stable producer co-operatives in competitive markets," MPRA Paper 31925, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:31925
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    References listed on IDEAS

    as
    1. Bruno Jossa & Gaetano Cuomo, 1997. "The Economic Theory of Socialism and the Labour-managed Firm," Books, Edward Elgar Publishing, number 1091.
    2. Marco Marini & Alberto Zevi, 1998. "The Reform of the Western European Co-operative Legislation: a First Assessment from a Bargaining Point of View," Rivista italiana degli economisti, Società editrice il Mulino, issue 1, pages 83-104.
    3. 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 1290-1320, September.
    4. Ben-Ner, Avner, 1988. "Comparative empirical observations on worker-owned and capitalist firms," International Journal of Industrial Organization, Elsevier, vol. 6(1), pages 7-31, March.
    5. Derek C. JONES, 1975. "British Producer Cooperatives And The Views Of The Webbs On Participation And Ability To Survive," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 46(1), pages 23-44, January.
    6. Ben-ner, Avner, 1984. "On the stability of the cooperative type of organization," Journal of Comparative Economics, Elsevier, vol. 8(3), pages 247-260, September.
    7. Marco, Marini, 1997. "Managers Compensation and Collusive Behaviour under Cournot Oligopoly," MPRA Paper 31871, University Library of Munich, Germany.
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    More about this item

    Keywords

    Producer Co-operatives; Wages; Self-employment;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D2 - Microeconomics - - Production and Organizations
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • J54 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Producer Cooperatives; Labor Managed Firms
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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