Wednesday, March 30, 2011
Posted by D. Daniel Sokol
Marco Marini, University of Urbino “Carlo Bo” and Alberto Zevi, University of Roma “La Sapienza” discuss JUST ONE OF US: CONSUMERS PLAYING OLIGOPOLY IN MIXED MARKETS.
ABSTRACT: Consumer cooperatives constitute a highly successful example of democratic forms of enterprises operating in developed countries. They are usually organized as medium and large-scale firms competing with profit-maximizing firms in retail industries. This paper models such situation as a mixed oligopoly in which consumer cooperatives maximize the utility of consumer-members and distribute them a share of the profit equal to the ratio of their individual expenditure to the firm total sales. We show that when consumers possess quasilinear preferences over a bundle of symmetrically di¤erentiated goods and firms operate with a linear technology, the presence of consumer cooperatives a¤ects all industries output and social welfare positively. The e¤ect of cooperatives on welfare proves more significant when goods are either complements or highly di¤erentiated and when competition is à la Cournot rather than à la Bertrand.