{"title":"Farmer Cooperatives and Competition: Who Wins, Who Loses and Why?","authors":"B. Carney, David Haines, Stephen P. King","doi":"10.2139/ssrn.2673396","DOIUrl":null,"url":null,"abstract":"Farmer-owned processing cooperatives are common in agricultural industries, but they differ from standard profit maximizing firms. The farmers who supply a cooperative are also the shareholders and a cooperative aims to maximize the overall return to its suppliers. So the presence of a cooperative can alter both market pricing and structure.In this paper, we develop a simple model to analyze the market impact of a farmer cooperative. We show how a cooperative can intensify the competition between processors for farmers' produce and benefit all farmers, including those who do not supply the cooperative. If, however, the presence of a cooperative changes industry structure, then the effect of a cooperative on farmers is ambiguous -- some farmers gain while others lose. The potential for farmers to free ride on a cooperative raises the possibility of market instability, where a cooperative is desirable overall to farmers, but the cooperative's shareholders may find it in their own interest to 'sell out' to a for-profit processor. We show that the market has two stable outcomes, one where there are only profit maximizing processors, and a second where a cooperative coexists with profit maximizing processors.","PeriodicalId":402954,"journal":{"name":"FoodSciRN: Other Agricultural Food Science","volume":"68 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"2015-10-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"FoodSciRN: Other Agricultural Food Science","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.2673396","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 1
Abstract
Farmer-owned processing cooperatives are common in agricultural industries, but they differ from standard profit maximizing firms. The farmers who supply a cooperative are also the shareholders and a cooperative aims to maximize the overall return to its suppliers. So the presence of a cooperative can alter both market pricing and structure.In this paper, we develop a simple model to analyze the market impact of a farmer cooperative. We show how a cooperative can intensify the competition between processors for farmers' produce and benefit all farmers, including those who do not supply the cooperative. If, however, the presence of a cooperative changes industry structure, then the effect of a cooperative on farmers is ambiguous -- some farmers gain while others lose. The potential for farmers to free ride on a cooperative raises the possibility of market instability, where a cooperative is desirable overall to farmers, but the cooperative's shareholders may find it in their own interest to 'sell out' to a for-profit processor. We show that the market has two stable outcomes, one where there are only profit maximizing processors, and a second where a cooperative coexists with profit maximizing processors.