Mandatory Cooperative and the Free Rider Problem: the Case of Santo Wines in Santorini, Greece

Constantine Iliopoulos and Irini Theodorakopoulou

Annals of Public and Cooperative Economics, 2014, vol. 85, issue 4, 663-681

Abstract: This paper addresses the issue of how the institutional environment shapes cooperatives' ability to address the free rider problem and combat intra-organizational challenges. Particularly we focus on Santo Wines, a mandatory wine cooperative based on the island of Santorini, Greece; membership of local grape-growers in the cooperative is compulsory by law. We shed light on Santo Wines' evolution since its formation, the intensity of the free rider problem facing the cooperative as well as on available options in case it loses its mandatory status. We argue that the cooperative might be able to survive and succeed without its mandatory status under certain conditions derived from Ostrom's eight core design principles for the efficacy of groups.

Date: 2014
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