The Cooperative Advantage: Theoretical Demonstration of the Case for Increased Productivity

Date of Award

2009

Document Type

Thesis

Degree Name

Bachelors

Department

Social Sciences

First Advisor

Elliot, Catherine

Keywords

Worker Cooperatives, Incentives, Principal-Agent Relationships, Attribute Analysis

Area of Concentration

Economics

Abstract

The idea of cooperation has always been at the center of economics, both as a foundation for the discipline and its ability to innovate human society continually. However, despite the importance of cooperation, the study of economics has often sought reasoning to undermine the notion of organizing firms under an explicitly cooperative structure. Understanding what a cooperative entails and how it serves the respective interests of worker and firm prove invaluable to discussing it in an economic context. This thesis will explore some possible avenues of economic theory that can support the idea that a cooperative firm increases the productivity of labor relative to a conventional firm. Necessary to obtain optimal productivity in any firm are the alignment of principal and agent incentives, so as to deter inefficiency costs that occur as a result of noncooperative behavior. Principal agent problems regarding decision and investment incentives are the two most relevant to the cooperative firm. I employ models of expected utility and attribute analysis to elucidate how these problems could be addressed in an abstract cooperative firm. I conclude that the models support the claim that a cooperative imperative must exist, realized in the formation of the cooperative firm, in order to increase productivity of labor. The thesis ends by advocating that economics continue exploring the viability of cooperative firms in all types of economic markets.

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