Le..
if = aiλf' - 1
This result sheds some light on the existing customer coops that their members (owners)
like the product which the firm is producing homogeneously (e.g.. Hansmann. 1996).
Comparing Ownership Allocations.—
Comparing the equilibrium investment levels under different ownership structures, using
the previous results summarized in the Lemma above, we obtain the following ranking of
ownership structures under pure internal competition between employees.
Proposition 3 : PVTien there are two customers who are eɪ-ɑnte the same but ex-post only
one of them likes the product, the efficiency ranking of other ownership structures will not
be changed from the case of homogeneous customers: however.
1. if ex-ante the customers cannot be differentiated on their preferences, customer own-
ership is dominated by other ownership structures;
2. if ex-ante the customers who likes the product owns the firm, then customer owner-
ship achieves the first best.
If we interpret a state ownership as a state-wide customer-ownership, then the first
part of the above proposition tells us that the lack of interests of some of the owners on
the products may make the publicly shared ownership inefficient. Moreover, on the other
hand, our model also sheds new lights on existing customer coops where owners are â
group of customers who demand the products. For example, the Associated Press has
long been a coop owned by its customers — thousands of newspapers and broadcasting
stations (Hansmann. 1996. p.158): retailer owned whole sale coops accounted for 80% of
the US hardware market (Hansmann, 1996. p.157): MasterCard and Visa are coops owned
by hundreds of local banks (Hansmann. 1996. p.158): Allied Van Lines was a coop owned
by hundreds of moving companies (Hansmann. 1996. p. 158): Finally. 43% of fertilizer: 38%
of petrel: 30% of chemicals in US farms were supplied by farm supply coops (Hansmann.
1996. p.149).
It will be interesting to compare our results with some of the most recent theoretical
works. In Hart and M∞re (1998). a coop is optimal when members are homogeneous in
preference. In Hart. Shleifer. and Vishny ∏996). the trade-off between public ownership
vs. private ownership is between non-contractiblc quality improvement and cost saving
incentives..
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