Journal of Economics

, Volume 99, Issue 3, pp 193–209

Takeovers and cooperatives: governance and stability in non-corporate firms

Article

DOI: 10.1007/s00712-010-0116-5

Cite this article as:
Kelsey, D. & Milne, F. J Econ (2010) 99: 193. doi:10.1007/s00712-010-0116-5

Abstract

If consumers wholly or partially control a firm with market power they will charge less than the profit maximizing price. Starting at the usual monopoly price, a small price reduction will have a second order effect 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 there will not be excessive takeovers of cooperatives due to the Grossman-Hart problem of free riding during takeovers.

Keywords

Corporate governanceCooperativeTake-overFree-riderExternality

JEL Classification

D70L20

Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of ExeterExeter, DevonUK
  2. 2.Department of EconomicsQueens UniversityKingstonCanada