Endogenous Market Structure and the Cooperative Firm

Brent Hueth, GianCarlo Moschini
May 2014  [14-WP 547]

When the threat of entry by followers includes cooperative firms, the maximum fixed cost that a profit maximizing leader can endure is endogenous. The aggressive strategy required for entry deterrence curtails the leader’s expected profit and can discourage its initial entry. In such circumstances a cooperative firm may yet be viable, despite having a cost handicap and no first-mover advantage.

Keywords: cooperatives, endogenous entry, entry deterrence, nonconvexity.

JEL codes: L22, P13

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