Jel Classification
D22, H22, H32, L21, L29, P13
N° Pages
Do Cooperatives Exercise Market Power?

Cooperatives, formally established to enhance social welfare and local economic development, often face pressures that divert them from these foundational goals and lead to their transformation into profit-driven entities that exploit market power. Leveraging an unexpected tax change following a vote of no confidence, we examine the pass-through to retail prices as a test for market power, using data from over 250 cooperatives operating in the Spanish fuel market. Our findings reveal a complete pass-through of the tax increase, deviating from the typical pattern observed among for-profit counterparts, which usually exhibit tax under-shifting, indicative of markup adjustments and mar- ket power exertion. Further descriptive evidence highlights lower prices at cooperative gas station relative to for-profit peers which is consistent with the absence of a markup among them. Our study challenges prevailing assumptions by illustrating cooperatives’ prioritization of consumer welfare over profit maximization, thereby justifying the regulatory advantages they enjoy.

Cooperatives, Pass-through to prices; Market power; Firm conduct; Retail fuel market.