'Just one of us': Consumers playing oligopoly in mixed markets

Marco, Marini and Alberto, Zevi (2010): 'Just one of us': Consumers playing oligopoly in mixed markets. Forthcoming in: Journal of Economics

Abstract

Consumer cooperatives represent a highly successful example of democratic form of enterprises operating in developed countries. They are usually medium to large-scale companies competing with the profit-maximizing firms in the retail sector. This paper describes this situation as a mixed oligopoly in which consumer cooperatives maximize the utility of consumer-members and, in return, refund them with a share of the profits corresponding to the ratio of their individual spending to the cooperative's total sales. We show that when consumers possess quasi-linear preferences over a bundle of symmetrically differentiated goods, and companies operate using a linear technology, the presence of consumer cooperatives positively affects total industry output, as well as welfare. The effect of cooperatives on welfare proves to be even more significant when goods are either complements or highly differentiated, and when competition is à la Cournot rather than à la Bertrand.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumer Cooperatives, Profit-maximizing Firms, Mixed Oligopoly
• Subjects: D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I30 - General; P - Economic Systems > P1 - Capitalist Systems > P13 - Cooperative Enterprises; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; D - Microeconomics > D0 - General > D01 - Microeconomic Behavior: Underlying Principles

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