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Cooperative Supply Chains in Peace and at War

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  • Agrell, Per J.
  • Karantininis, Kostas

Abstract

In the competition between supply chains, governance structure and coordination mechanisms can be as important as cost-efficiency. Flexible and non-committing contracts among upstream suppliers in cooperative alliances may lead to lower chain surplus through internal competition and renders the coordinator's position vulnerable for hostile take-overs. Cooperative supply chains are found in e.g. food industry, banking services, lawfirms and brokerage. The downstream processing or brand is owned collectively by the suppliers or service-providers. The supplier are linked to the chain by strong delivery (channel) rights and volume-based revenue-sharing schemes. The governance is flexible, promotes entry and market expansion. However, the decentralized decision making comes at a cost in terms of chain performance and resilience. A dynamic two-chain model with a captive and competitive market addresses the particular situation where the competing chain aggressor has a cooperative governance structure. The overt aggression at merger may have more to do with shortcomings in the managerial incentive structure than with the pursuit of market power. The results from the dynamic game is illustrated with empirical findings among dairy cooperatives in Denmark.

Suggested Citation

  • Agrell, Per J. & Karantininis, Kostas, 2000. "Cooperative Supply Chains in Peace and at War," Unit of Economics Working Papers 24209, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
    • Handle: RePEc:ags:rvaewp:24209
    DOI: 10.22004/ag.econ.24209
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    References listed on IDEAS

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    1. Farrell, Joseph & Shapiro, Carl, 1990. "Horizontal Mergers: An Equilibrium Analysis," American Economic Review, American Economic Association, vol. 80(1), pages 107-126, March.
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    3. Richard J. Sexton, 1986. "The Formation of Cooperatives: A Game-Theoretic Approach with Implications for Cooperative Finance, Decision Making, and Stability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(2), pages 214-225.
    4. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    5. Drew Fudenberg & Eric Maskin, 2008. "The Folk Theorem In Repeated Games With Discounting Or With Incomplete Information," World Scientific Book Chapters, in: Drew Fudenberg & David K Levine (ed.), A Long-Run Collaboration On Long-Run Games, chapter 11, pages 209-230, World Scientific Publishing Co. Pte. Ltd..
    6. Agrell, Per J. & Karantininis, Kostas, 1999. "Cooperatives' Merger Strategies: The MD Foods - Klover Maelk Case," Unit of Economics Working Papers 24193, Royal Veterinary and Agricultural University, Food and Resource Economic Institute.
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    Cited by:

    1. Valentinov, Vladislav & Iliopoulos, Constantine, 2013. "Economic theories of nonprofits and agricultural cooperatives compared: New perspectives for nonprofit scholars," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 42(1), pages 109-126.

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