Consumer Cooperatives: Blessing or Curse?

In this paper, I study under which conditions consumer cooperatives are beneficial to consumers where both producers and consumer cooperatives have market power. I establish, contrary to a first intuition, that consumer welfare is non-monotonic in the cooperative size--specifically, consumer welfare first increases and then decreases with the cooperative size. This is because a larger cooperative size may lead to underproduction, and hence may be harmful to consumers. I then show that more intense competition among producers can be more effective in promoting consumer welfare than consumer cooperatives.