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Cooperatives as Entrants

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  • Richard J. Sexton
  • Terri A. Sexton

Abstract

A potential shortcoming of game-theoretic models in industrial organization is their failure to consider consumers as players. We introduce a customer coalition --- a cooperative -- as a potential entrant and compare the cooperative entry threat with that posed by the usual for-profit entrant. We identify four fundamental distinctions between cooperative and for-profit entrants and demonstrate that the strategic interplay between a cooperative and an incumbent firm may differ markedly from that between the incumbent and a for-profit entrant. The results impart a prospectively powerful role to potential cooperatives in beneficially regulating free-market performance.

Suggested Citation

  • Richard J. Sexton & Terri A. Sexton, 1987. "Cooperatives as Entrants," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 581-595, Winter.
    • Handle: RePEc:rje:randje:v:18:y:1987:i:winter:p:581-595
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