Consumer Cooperatives and Welfare in a Mixed Oligopoly
Consumer co-operatives constitute a highly successful example of democratic forms of enterprises operating in developed countries. They are usually organized as medium or large-scale firms competing with profit seeking firms in retail industries. In this paper we model such a situation as a mixed oligopoly in which consumer co-operatives maximize consumer-members' utilities and distribute them a patronage rebate on their goods purchase. We show that when consumers possess quasilinear preferences over a bundle of symmetrically differentiated goods and firms operate with a linear technology, the presence of consumer co-operatives positively a¤ects all industries output and social welfare. The effect of Co-ops on welfare is shown to be more significant when goods are either complements or highly di¤erentiated and when competition is à la Cournot rather than à la Bertrand.
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|Date of revision:||2010|
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- de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.