The Advantage of Cooperatives under Asymmetric Cost Information

A measure of the relative social loss from having an IO as opposed to an
CO processor could be

where the nominator is the social loss (from not producing when costs are
high) in the IO regime and the denominator is the total social gain available
(and realized by a cooperative). The relative social loss RSL as a function of
p is depicted in Figure 1 below when μ_i ≡≈ ε< = 1.

Fig 1.: Relative Social Loss from 10, μ_i — ε_i ≈= 1

A more detailed illustration of RSL is provided in Figure 2 where we assume
μ_i = ι.

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