Internal governance and member investment behavior in energy cooperatives: An experimental approach

• Internal governance in energy cooperatives is discussed.
• Economic experiments can complement observational studies.
• Behavioral impacts of cooperative models are tested in a game.
• Cooperative associations can improve internal governance.

Cooperatives may become increasingly important as suppliers of electricity from renewable resources. Numerous governance models exist for establishing a renewable energy cooperative. Since members self-select into the organization, causal links between methods of internal governance and member characteristics are difficult to identify. We demonstrate how economic experiments can address this problem. In a simple social-dilemma game, we study the impact of heterogeneity in wealth on investment in a jointly owned enterprise under two different governance models. We do not find that member heterogeneity or governance model affect investment levels. A participant's endowment appears to be the most important factor explaining variation in investment. Good knowledge of cooperative governance has a positive impact on investment in the game and good knowledge of game theory has a negative impact on investment in the game. Future research should investigate the effect of the distribution of control rights on the performance of cooperative enterprises.