Takeovers and Cooperatives

Frank Milne and David Kelsey

No 273589, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: If consumers wholly or partially control a rm with market power they will charge less than the pro t maximising price. Starting at the usual monopoly price, a small price reduction will have a second order e¤ect on pro ts but a rst order e¤ect 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-pro t businesses. This paper studies takeovers of cooperatives. We argue that cooperatives are in fact quite stable due to the Grossman-Hart problem of free riding during takeovers.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 22
Date: 2006-08
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Working Paper: Takeovers And Cooperatives (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:273589

DOI: 10.22004/ag.econ.273589

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