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Patronage Refunds, Producer Expectations and Optimal Pricing by Agricultural Cooperatives

Author

Listed:
  • Royer, Jeffrey S.
  • Smith, Darnell B.

Abstract

This paper presents a dynamic model of a processing cooperative in which patronage refunds are taken into consideration by producers in making marketing decisions and by the cooperative in establishing pricing strategies. An adaptive expectations framework is used to represent the formation of producer expectations of patronage refunds. The model suggests that cooperatives can successfully distribute earnings to producers as patronage refunds while using prices as instruments for achieving and maintaining optimal output levels. This result challenges conventional ideas about cooperative market behavior and implies that public support for cooperatives should be based on empirical analysis rather than theoretical arguments alone.

Suggested Citation

  • Royer, Jeffrey S. & Smith, Darnell B., 2007. "Patronage Refunds, Producer Expectations and Optimal Pricing by Agricultural Cooperatives," Journal of Cooperatives, NCERA-210, vol. 20, pages 1-18.
    • Handle: RePEc:ags:jlcoop:46577
    DOI: 10.22004/ag.econ.46577
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    Cited by:

    1. Zhang, Tianwei & Mallory, Mindy L., 2010. "Patronage Refunds Paying Decision of Farm Credit System Associations: A Logit Model," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61756, Agricultural and Applied Economics Association.
    2. Liang, Qiao & Huang, Zuhui & Lu, Haiyang & Wang, Xinxin, 2015. "Social Capital, Member Participation, and Cooperative Performance: Evidence from China’s Zhejiang," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(1), pages 1-30, February.
    3. McKee, Gregory & Larsen, Ryan, 2012. "The Effects of Uncertainty and Capital Source on Cooperative Firm Leverage," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 40(2), pages 1-18.
    4. Royer, Jeffrey S., 2014. "The Neoclassical Theory of Cooperatives: Part I," Journal of Cooperatives, NCERA-210, vol. 28, pages 1-20.

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    Keywords

    Agribusiness;

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