Random input price and the theory of the competitive cooperative firm

This paper examines a competitive cooperative firm under input-price uncertainty, comparing it with a capitalist firm. We show that the firm with input-price uncertainty produces output with a smaller capital-labor ratio than that of the certainty equivalent twin. Further, we show that the effects of a change in uncertainty on capital, labor, and output are the same as the effects of a change in wage; however, the effects of output-price changes are exactly the opposite. In general, we cannot infer results concerning the behavior of the cooperative firm from the behavior of the capitalist firm.