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Abstract

The conditions under which co-operative monopolies can be self-regulating in the sense of behaving similarly (at a minimum) to an efficiently regulated monopoly are modelled in this paper. I argue that an employee-owned or workers’ co-operative monopoly can be expected to operate similarly to an investor-owned monopoly generating relative high prices and lower levels of output and producing deadweight losses. But such a co-operative would be relatively more x-efficient because of its incentive environment. I argue, however, that a multi-stakeholder co-operative, incorporating the preferences of consumers and other stakeholders, can be expected to behave similarly (at a minimum) to an efficiently regulated monopoly, whilst generating a higher level of x-efficiency than the investor-owned monopoly and a more equitable distribution of income. Critical to this argument is the quality of governance of the co-operative and the inability of the executive of the co-operative to capture the decision-making goals and objectives from the collective. Such ‘co-operative capture’ would lead to a failure in co-operative governance resulting in co-operative outcomes converging to those of unregulated investor-owned firms.

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