Is there a co-operative advantage? Experimental evidence on the economic and non-economic determinants of demand

TY - JOUR

T1 - Is there a co-operative advantage?

T2 - Experimental evidence on the economic and non-economic determinants of demand

AU - Altman, Morris

PY - 2016/12

Y1 - 2016/12

N2 - Focusing on consumer co-operatives, I test the conventional economic worldview that relative price is a main determinants of consumer behaviour using survey instruments in a classroom setting. I examine the role which non-economic variables such as 'warm glow' might play in determining demand. My findings challenge the narrow economic worldview that only economic variables count; but support a core assumption that economic variables are of fundamental importance to individual's choice decisions. Significantly, individuals are willing to pay higher prices for co-operative products even if they are not co-op members. However, as the price of co-operative products increases relative to the products of non-co-operatives, demand falls amongst both non-members and members of co-operatives. But demand is more inelastic for co-op members. When price is the same for co-ops and non-co-op, even non-co-ops members prefer to purchase products sold by co-operatives. The co-operative advantage provides co-ops with a protective belt against competition from non-cooperatives. This also speaks to the potential strength of consumer co-ops in competitive markets. Firms that invest in both economic and non-economic determinants of consumer demand, should be characterized by a significant competitive advantage.

AB - Focusing on consumer co-operatives, I test the conventional economic worldview that relative price is a main determinants of consumer behaviour using survey instruments in a classroom setting. I examine the role which non-economic variables such as 'warm glow' might play in determining demand. My findings challenge the narrow economic worldview that only economic variables count; but support a core assumption that economic variables are of fundamental importance to individual's choice decisions. Significantly, individuals are willing to pay higher prices for co-operative products even if they are not co-op members. However, as the price of co-operative products increases relative to the products of non-co-operatives, demand falls amongst both non-members and members of co-operatives. But demand is more inelastic for co-op members. When price is the same for co-ops and non-co-op, even non-co-ops members prefer to purchase products sold by co-operatives. The co-operative advantage provides co-ops with a protective belt against competition from non-cooperatives. This also speaks to the potential strength of consumer co-ops in competitive markets. Firms that invest in both economic and non-economic determinants of consumer demand, should be characterized by a significant competitive advantage.

KW - Choice theory

KW - Co-operative advantage

KW - Co-operatives

KW - Survey experiment

KW - Warm glow

KW - Welfare improvement

UR - https://www.scopus.com/pages/publications/85028273742

U2 - 10.1016/j.jcom.2016.08.003

DO - 10.1016/j.jcom.2016.08.003

M3 - Article

AN - SCOPUS:85028273742

SN - 2213-297X

VL - 4

SP - 66

EP - 75

JO - Journal of Co-operative Organization and Management

JF - Journal of Co-operative Organization and Management

IS - 2

ER -