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Takeovers and Cooperatives

  • Frank Milne


    (Queen's University)

  • David Kelsey

    (University of Exeter)

If consumers wholly or partially control a firm with market power they will charge less than the profit maximising price. Starting at the usual monopoly price, a small price reduction will have a second order e¤ect on profits but a first order effect on consumer surplus. Despite this desirable static result, it has been argued that cooperatives are vulnerable to take-over by outsiders who will run them as for-profit businesses. This paper studies takeovers of cooperatives. We argue that cooperatives are in fact quite stable due to the Grossman-Hart problem of free riding during takeovers.

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Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1113.

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Length: 20 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:qed:wpaper:1113
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  1. Stefano Demichelis & Klaus Ritzberger, 2007. "Corporate Control and the Stock Market," Carlo Alberto Notebooks 60, Collegio Carlo Alberto.
  2. Oliver Hart & John Moore, 1996. "The Governance of Exchanges: Members' Co-operatives Versus Outside Ownership," STICERD - Theoretical Economics Paper Series 292, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  3. Joseph Farrell, 1985. "Owner-Consumers and Efficiency," Working papers 380, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Roemer, J.E., 1991. "Would Economic Democracy Decrease the Amount of Public Bads?," Papers 376, California Davis - Institute of Governmental Affairs.
  5. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-40, December.
  6. Frank Milne & David Kelsey, 2005. "Externalities, Monopoly and the Objective Function of the Firm," Working Papers 1078, Queen's University, Department of Economics.
  7. Vickers, John, 1985. "Delegation and the Theory of the Firm," Economic Journal, Royal Economic Society, vol. 95(380a), pages 138-47, Supplemen.
  8. Erkan YalÁin & Thomas I. Renstr–m, 2003. "Endogenous Firm Objectives," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(1), pages 67-94, 01.
  9. Jeffrey W. Allen & Gordon M. Phillips, 2000. "Corporate Equity Ownership, Strategic Alliances, and Product Market Relationships," Journal of Finance, American Finance Association, vol. 55(6), pages 2791-2815, December.
  10. C. Edward Fee & Charles J. Hadlock & Shawn Thomas, 2006. "Corporate Equity Ownership and the Governance of Product Market Relationships," Journal of Finance, American Finance Association, vol. 61(3), pages 1217-1251, 06.
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