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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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    2. Aristotelis Batzios & Achilleas Kontogeorgos & Fotios Chatzitheodoridis & Panagiota Sergaki, 2021. "What Makes Producers Participate in Marketing Cooperatives? The Northern Greece Case," Sustainability, MDPI, vol. 13(4), pages 1-15, February.
    3. Julia Amend & Patrick Troglauer & Tobias Guggenberger & Nils Urbach & Martin Weibelzahl, 2024. "Facilitating cooperation of smallholders in developing countries: design principles for a cooperative-oriented decentralized autonomous organization," Information Systems and e-Business Management, Springer, vol. 22(1), pages 1-31, March.
    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. Ahmet Candemir & Sabine Duvaleix & Laure Latruffe, 2021. "Agricultural Cooperatives And Farm Sustainability – A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1118-1144, September.
    6. 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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