IDEAS home Printed from https://ideas.repec.org/a/ags/jlaare/8628.html
   My bibliography  Save this article

Are Cooperatives Efficient When Membership is Voluntary?

Author

Listed:
  • Leathers, Howard D.

Abstract

If profit-maximizing farmers are free to join or not to join a cooperative, it may appear reasonable to assume that a cooperative will exist only when it has cost advantaged over non-cooperative marketing. This paper presents a model in which that result fails. Every individual farmer chooses either to join or not join a cooperative depending on whether transactions costs are lower from cooperative membership or nonmembership. As cooperative membership increases, transactions costs for members decline, but for nonmembers these costs increase. Results of this analysis reveal that an equilibrium exists in which all farmers voluntarily choose to join the cooperative, but more than half of the members wish the cooperative had not been formed, and transactions costs in the aggregate are higher with the cooperative then without it.

Suggested Citation

  • Leathers, Howard D., 2006. "Are Cooperatives Efficient When Membership is Voluntary?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(3), pages 1-10, December.
    • Handle: RePEc:ags:jlaare:8628
    DOI: 10.22004/ag.econ.8628
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/8628/files/31030667.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.8628?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. George Hendrikse & Jos Bijman, 2002. "Ownership Structure in Agrifood Chains: The Marketing Cooperative," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 104-119.
    2. Michael E. Sykuta & Michael L. Cook, 2001. "A New Institutional Economics Approach to Contracts and Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1273-1279.
    3. Kostas Karantininis & Angelo Zago, 2001. "Endogenous Membership in Mixed Duopsonies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1266-1272.
    4. Avinash Dixit, 2003. "Clubs with Entrapment," American Economic Review, American Economic Association, vol. 93(5), pages 1824-1829, December.
    5. Claude Ménard & Peter G. Klein, 2004. "Organizational Issues in the Agrifood Sector: Toward a Comparative Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 750-755.
    6. 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.
    7. Mathew O. Tobriner, 1924. "How Shall Cooperatives be Organized?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 6(4), pages 367-377.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Katchova, Ani L., 2010. "Agricultural Cooperatives and Contract Price Competitiveness," Journal of Cooperatives, NCERA-210, vol. 24, pages 1-13.
    2. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salifu, Adam & Francesconi, Gian Nicola & Kolavalli, Shashidhara, 2010. "A review of collective action in rural Ghana," IFPRI discussion papers 998, International Food Policy Research Institute (IFPRI).
    2. Francesconi, Gian Nicola & Ruben, Ruerd, 2008. "The Life Cycle of Agricultural Cooperatives: Implications for Management and Governance in Ethiopia," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 36(2), pages 1-16.
    3. Hanf, J.H. & Pieniadz, A., 2008. "Chain quality management in co-operatives," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 43, March.
    4. Hanf, Jon Henrich & Pieniadz, Agata, 2007. "What does the 'New Quality' mean in view of Polish dairy cooperatives?," 105th Seminar, March 8-10, 2007, Bologna, Italy 7858, European Association of Agricultural Economists.
    5. Hanf, Jon H. & Török, Timea, 2009. "Are Co-operatives a Way to Integrate Small Farmers in Supply Chain Networks? Preliminary Thoughts on Hungary," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 37(1), pages 1-12.
    6. Hanf, Jon Henrich & Pieniadz, Agata, 2007. "Chain Quality Management In Co-Operatives," 47th Annual Conference, Weihenstephan, Germany, September 26-28, 2007 7604, German Association of Agricultural Economists (GEWISOLA).
    7. Francesconi, Gian Nicola & Wouterse, Fleur, 2011. "The renewed case for farmers' cooperatives: Diagnostics and implications from Ghana," IFPRI discussion papers 1129, International Food Policy Research Institute (IFPRI).
    8. Benmehaia, Mohamed Amine & Brabez, Fatima, 2016. "The Propensity To Cooperate Among Peasant Farmers In Algeria: An Analysis From Bivariate Approach," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 4(4), pages 1-14, October.
    9. Fares, M’hand & Raza, Saqlain & Thomas, Alban, 2018. "Is there complementarity between labels and brands? Evidence from small French co-operatives," TSE Working Papers 18-895, Toulouse School of Economics (TSE).
    10. Marcos Matás, Gustavo & Hernández Espallardo, Miguel & Arcas-Lario, Narciso, 2014. "La disposición a invertir en cooperativas agroalimentarias: el papel de la heterogeneidad y el oportunismo de los socios," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 14(01), pages 1-19, June.
    11. Zivkovic, Sanja & Hudson, Darren & Johnson, Phillip & Park, John, 2016. "A Study in Attitudes Shaping Cooperative Leadership," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229588, Southern Agricultural Economics Association.
    12. Agbo, Maxime & Rousselière, Damien & Salanié, Julien, 2015. "Agricultural marketing cooperatives with direct selling: A cooperative–non-cooperative game," Journal of Economic Behavior & Organization, Elsevier, vol. 109(C), pages 56-71.
    13. Julien Cadot, 2015. "Agency costs of vertical integration—the case of family firms, investor-owned firms and cooperatives in the French wine industry," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 187-194, March.
    14. repec:hal:journl:halshs-01098762 is not listed on IDEAS
    15. Jerzy Michalek & Pavel Ciaian & Jan Pokrivcak, 2018. "The impact of producer organisations on farm performance: A case study of large farms in Slovakia," JRC Research Reports JRC108059, Joint Research Centre.
    16. Marco A. MARINI & Paolo POLIDORI & Desiree TEOBALDELLI & Alberto ZEVI, 2015. "Welfare Enhancing Coordination In Consumer Cooperatives Under Mixed Oligopoly," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 505-527, September.
    17. Hu, Y. & Huang, Z. & Hendrikse, G.W.J. & Xu, X., 2005. "Organization and Strategy of Farmer Specialized Cooperatives in China," ERIM Report Series Research in Management ERS-2005-059-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    18. Eeva Alho, 2015. "Farmers’ self-reported value of cooperative membership: evidence from heterogeneous business and organization structures," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 3(1), pages 1-22, December.
    19. Cadot, Julien, 2014. "Agency costs of vertical integration: the case of wine business in France," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182671, European Association of Agricultural Economists.
    20. Gelo, Dambala & Muchapondwa, Edwin & Shimeles, Abebe & Dikgang, Johane, 2020. "Aid, collective action and benefits to smallholders: Evaluating the World Food Program's purchase for progress pilot," Food Policy, Elsevier, vol. 97(C).
    21. George Hendrikse & Li Feng, 2013. "Interfirm cooperatives," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 26, Edward Elgar Publishing.

    More about this item

    Keywords

    Agribusiness;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:jlaare:8628. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/waeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.