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.
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Kelsey, D., Milne, F. Takeovers and cooperatives: governance and stability in non-corporate firms. J Econ 99, 193–209 (2010). https://doi.org/10.1007/s00712-010-0116-5
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DOI: https://doi.org/10.1007/s00712-010-0116-5