Choosing to Defect from Cooperation—the 2003 Collapse of California Pear Bargaining

Bargaining in agriculture is collective because an agent represents multiple principals, the farmers, in contrast to an agent who negotiates on behalf of a single or corporate entity. Collective bargaining adds the complication of securing commitments from several individuals, each possibly having a slightly different reservation value for an acceptable agreement. A disadvantage for a collective bargaining agent may emerge when negotiating with an agent representing a single or corporate principal rather than another collective group of principals. Such asymmetry provides opportunities for a single agent to exploit differences among heterogeneous principals when negotiating with a collective agent. The structure of California pear growers consists not only of a wide distribution in the size of farm production, but involves a special class of very large growers who also operate packing businesses for marketing to nonprocessed, fresh markets. These grower-packers had gradually withdrawn from membership in the bargaining cooperative, but they provided tacit cooperation by refraining from taking contracts until the association concluded its negotiations with food processors. This form of tacit cooperation provided a credible commitment for California pear bargaining for several years, until the system failed in 2003 under aggressive negotiating pressure from one of the fruit processors. Tacit cooperation between two entities involves interdependent decisions. Such situations are frequently analyzed using game theory techniques. The Prisoners’ Dilemma (PD) is the most famous situation of tacit choice between cooperation and defection. But in the California pear case of 2003, the decision outcomes were asymmetrical. Interviews of the bargaining association manager and representatives of the grower-packers included ordinal ranking of choices and outcomes. These results produced two different game matrices that reflect their different interpretations of the available choices and what they believed was their counterpart’s ranking. Game theory provides a structure for specifying choices that result in either achieving or abandoning joint maximum gains from cooperation. Applying game theory to a historical case study keeps the research focus on contingencies and reasons other than irrational or behavioral limitations that lead to defection from cooperation. Lastly, a game theory framework helps point out several remedial strategies that collective bargaining agents could use to establish credible commitment.