Organizational Form and Payoff Imbalances in an Aggrievement Model: Cooperatives Versus Markets

17 Pages Posted: 30 Jun 2014

See all articles by Francisco Santos‐Arteaga

Francisco Santos‐Arteaga

Universidad Complutense de Madrid (UCM) - Institute of International Studies (ICEI)

Guenter Schamel

Free University of Bozen-Bolzano - Faculty of Economics and Management

Date Written: June 29, 2014

Abstract

Hart and Holmstrom (2010) claim that organizational form conditions the sense of entitlement of the parties. This determines their feeling of being aggrieved by the outcome of the contract and therefore their shading, which creates deadweight losses. Cooperatives constitute integrated organizational forms while privately owned firms are nonintegrated. The main result obtained states that if the intensity of shading depends positively on the existing payoff imbalances between bosses and managers, then (non)integration with coordination is more plausible when the profits of bosses and benefits of managers are (dis)similar. Moreover, given plausible parameter constraints, we illustrate how both organizational forms, an integrated cooperative and a nonintegrated private firm, may coexist in a coordinated equilibrium and how the former may even obtain a higher social surplus than the latter one.

Suggested Citation

Santos Arteaga, Francisco and Schamel, Gunter, Organizational Form and Payoff Imbalances in an Aggrievement Model: Cooperatives Versus Markets (June 29, 2014). Available at SSRN: https://ssrn.com/abstract=2460516 or http://dx.doi.org/10.2139/ssrn.2460516

Francisco Santos Arteaga (Contact Author)

Universidad Complutense de Madrid (UCM) - Institute of International Studies (ICEI) ( email )

Collado Villalba, Madrid, 28400
United States

Gunter Schamel

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Serniesi 1
I-39100 Bozen-Bolzano (BZ)
Italy
+39-0471-013-170 (Phone)

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