less qualified lawyers are kept as permanent associates (Hansmann. 1996. p-91, 94 and
n.9). United Airlines is owned by pilots and mechanists who are skilled but minorities of
the employees (Hansmann, 1996, pp.117-118).
Customer Ownership when Customers Are Heterogeneous (sketch)
Consider now the situation where the customers are not homogeneous. SpecificallAr.
we assume that they are ex-post different on their value on the product, although ex-ante
they have the same probability in their valuations on the product. We now suppose that
one client ex-post do not want the product, i.e. the ex-post value of the product is zero;
and the ex-post value of the product of another client is v if it is produced outside of the
firm, or V1 if it is produced within the firm. Ex-ante the two clients are the same, that
they both have ∣ probability to like the product or not to like the product ex-post. It is
easy to show that the ex post heterogeneity of customers has no impact on the efficiency
of other ownership structures except for customer ownership itself.
When a firm is owned by the two customers jointly (when the firm is owned by only
one of the customers the result will be the same as the joint case), the expected value of
the product for each customer owner is ⅞. Thus, the bargaining solution is,
Agent: employee Eγ employee Ei outside owner O customer C
share: ⅜ (V-V) 0 0 ⅛
Therefore, each employee El's ex-ante expected gross payoff is : ⅛ (V' — V). and each
employee chooses his investment level to maximize
≡x{⅛(∕(λfog(l + ⅛i))-∕(v))-*i}. (9)
fct>0 2
If the two customers are not the same ex-ante that with a probability of p customer C1
will like the product and with a probability of 1 — p customer C2 will like the product,
and if C1 owns the firm, then the result will be similar except replacing ⅛ by α⅛ρ. We,
thus, obtain:
Lemma 9 If the owner-customer has a probability p to like the product ex-post, the equi-
librium investment levels under the C1 cooperative is:
i = Ctipλft - 1
Therefore, it is obvious that if ex-ante it is known which customer likes the product
ex-post and let that customer owns the firm, then customer coop achieves the fist best,
ι ς