Do Cooperatives Exercise Market Power? Evidence from Pass-Through to Retail Prices

Federico M. Accursi, Raúl Bajo-Buenestado and Raul Bajo-Buenestado

No 11473, CESifo Working Paper Series from CESifo

Abstract: Cooperatives, formally established to enhance social welfare and local economic development, often face pressures that divert them from these foundational goals and lead to their transformation into profit-driven entities that exploit market power. Leveraging an unexpected tax change following a vote of no confidence, we examine the pass-through to retail prices as a test for market power, using data from over 250 cooperatives operating in the Spanish fuel market. Our findings reveal a complete pass-through of the tax increase to retail prices. Additionally, descriptive evidence suggests that cooperatives consistently offer lower prices than their for-profit counterparts. These results are indicative of the absence of markup adjustments and market power exertion among cooperatives and are consistent with their prioritization of consumer welfare over profit maximization, thereby justifying the regulatory advantages they enjoy.

Keywords: cooperatives; pass-through to prices; market power; firm conduct; retail fuel market (search for similar items in EconPapers)
JEL-codes: D22 H22 H32 L21 L29 P13 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11473

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