Unfair allocation of gains under equal price in cooperative purchasing

Fredo Schotanus

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Abstract

Cooperative purchasing is becoming more and more common practice. However, many cooperative initiatives end prematurely or do not flourish. Important reasons indi-cated for these problems are directly or indirectly related to the unfair allocation of gains. The purpose of this paper is to analyse causes of unfairness in current cooperative practices, and in particular unfairness resulting from using the Equal Price allocation concept. I suggest that the unfair effects of this commonly used concept are caused by neglecting a specific part of the added value of cooperative initiative members. Moreover, I prove that when using the Equal Price concept organisations will receive fewer gains if they increase their volume past 38% of the total volume of a cooperative initiative. In case of a constant total volume I prove that Equal Price reaches its maximum pay-off when the volume of an organisation equals 25%. I conclude by emphasizing the importance of cooperative members becoming aware of allocation concept problems. Further research will involve possible solutions to these problems.
Original languageUndefined
Title of host publicationProceedings of the 14th Annual ISPERA Conference, 20-23 March 2005, Archamps, France
EditorsR. Calvi, N. Merminod
Pages975-986
Number of pages12
Publication statusPublished - 2005
Event14th Annual IPSERA Conference 2005: Researches in Purchasing and Supply Management - Geneva/Archamps, France
Duration: 20 Mar 200523 Mar 2005
Conference number: 14

Other

Other14th Annual IPSERA Conference 2005
CountryFrance
CityGeneva/Archamps
Period20/03/0523/03/05

Keywords

  • METIS-224622
  • Cooperative game theory
  • IR-57990
  • allocation of gains
  • Equal Price
  • Cooperative Purchasing

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