Abstract: This paper is an extension of our recent paper in this Journal in which we developed and set forth a theoretical framework for the analysis of consumer owned and managed firms. While the earlier paper analyzed the equilibrium conditions that determine the optimal output, price and membership size of the cooperative, the primary purpose of this paper is to analyze the production decisions of the consumer-manager and the way changes in production variables such as input prices change the equilibrium levels of the choice variables. We have shown in this paper that the theory of factor usage for the consumer-owned, consumer-managed firm is rather similar in many areas to the theory of factor usage for the competitive firm and industry. Changes in levels of input usage, optimal membership size, and optimal output depend crucially upon the expenditure elasticity of the inputs. Changes in the consumption of the cooperatively produced good depend upon the normality or inferiority of the good. We might note that these results were obtained from a model that utilized a cost function to summarize the technology of the cooperative. As we shall demonstrate in the appendix, modelling with the production function as the primitive theoretical construct yields identical results. The methodology employed in the main body of the paper, however, is a more simple, straightforward approach to the problem.

　　Subjects: CONSUMER cooperatives; PRODUCTION (Economic theory); EQUILIBRIUM (Economics)