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Horizon and Free-Rider Problems in Cooperative Organizations

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  • Giannakas, Konstantinos
  • Fulton, Murray
  • Sesmero, Juan

Abstract

This paper develops a model of heterogeneous individuals to analyze the interacting horizon and free-rider problems faced by cooperative organizations. Analytical results identify the conditions under which a cooperative will form despite these property rights problems and show that (i) differences in members’ time horizons need not necessarily lead to short-term cooperative investments and (ii) free riding is not always a problem for cooperatives. The analysis also shows how a cooperative can use a membership fee to address these property rights problems and provides additional insights into the relationship between a cooperative’s cost structure and membership fees.

Suggested Citation

  • Giannakas, Konstantinos & Fulton, Murray & Sesmero, Juan, 2016. "Horizon and Free-Rider Problems in Cooperative Organizations," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(3), pages 1-21.
    • Handle: RePEc:ags:jlaare:246170
    DOI: 10.22004/ag.econ.246170
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    Cited by:

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    3. Malvido Perez Carletti Agustina & Hanisch Markus & Rommel Jens & Fulton Murray, 2018. "Farm Gate Prices for Non-Varietal Wine in Argentina: A Multilevel Comparison of the Prices Paid by Cooperatives and Investor-Oriented Firms," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 16(1), pages 1-14, January.
    4. Evans, Alecia & Sesmero, Juan Pablo, 2022. "Noisy Payoffs in an Infinitely Repeated Prisoner’s Dilemma – Experimental Evidence," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322434, Agricultural and Applied Economics Association.
    5. Gezahegn, Tafesse & Van Passel, Steven & Berhanu, Tekeste & D'Haese, Marijke & Maertens, Miet, 2020. "Structural and Institutional Heterogeneity among Agricultural Cooperatives in Ethiopia: Does it Matter for Farmers’ Welfare?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 46(2), August.

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