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An Endogenous Group Formation Theory of Co-operative Networks: The Economics of La Lega and Mondragón

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  • Sumit Joshi
  • Stephen C. Smith

Abstract

This paper develops a theory of endogenous league formation and considers its implications for policy in developing countries. We generalize from features of the two most prominent European co-op leagues, Mondragón and La Lega, to develop the first formal model of the endogenous formation of co-operative networks and their constituent member coops. We show that if co-op leagues are formed through an open membership game, there can be two Nash equilibria, one with and one without a co-op league; and in this case, the equilibrium with a co-op league Pareto dominates the latter.

Suggested Citation

  • Sumit Joshi & Stephen C. Smith, 2002. "An Endogenous Group Formation Theory of Co-operative Networks: The Economics of La Lega and Mondragón," WIDER Working Paper Series DP2002-87, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2002-87
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    References listed on IDEAS

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