Unfair division of gains under equal price in cooperative purchasing


Schotanus, Fredo and Telgen, Jan and Boer de, Luitzen (2005) Unfair division of gains under equal price in cooperative purchasing. In: Researches in purchasing and supply management: proceedings of the 14th IPSERA Conference, Archamps, France. IFPSM publications, 5 . IFPSM Summer School Secretariat, Budapest, pp. 135-144.

Abstract:Cooperative purchasing is becoming more and more common practice. However, many cooperative initiatives end prematurely or do not flourish. Important reasons indicated for these problems are directly or indirectly related to the unfair division of gains. The purpose of this paper is to indicate causes of unfairness effects in current cooperative practices, aiming to enhance cooperative trust and stability. Results incorporate an extensive analysis of the most commonly used allocation concept, the Equal Price. We prove that the unfair effects of this concept are caused by neglecting a part of the added value of cooperative initiative members. Moreover, we prove that the Equal Price allocation value reaches its maximum when the volume of an organisation equals a certain percentage of the total volume of a cooperative initiative. So, when using the Equal Price organizations increasing their volume past this point will receive less gains. We conclude by emphasizing that it is highly important that cooperative members are aware of allocation concept problems. Further research will involve solutions to these problems.
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Management and Governance (SMG)
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