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Resource type: Essays
Title: Takeovers and Cooperatives: Governance and Stability in Non-corporate Firms
Author(s): David Kelsey and Frank Milne
Date: 11 January 2010
File:
URL: http://people.exeter.ac.uk/dk210/coop-stability.pdf
Category: Co-operatives

If consumers wholly or partially control a firm with market power they will charge less than the profit maximizing price. Starting at the usual monopoly price, a small price reduction will have a second order effect on profits but first order effect 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-profit businesses. This paper studies takeovers of cooperatives.
We argue that there will not be excessive takeovers of cooperatives due to the Grossman-Hart problem of free riding during takeovers.

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