Marketing Cooperatives In Mixed Duopolies

This paper analyses a market in which agents with different ownership structures compete with each other by simultaneously choosing quantities. In the first part of the paper, the government can choose to support the formation of a marketing cooperative by a group of farmers, or to establish a public marketing firm. The resulting market structures will thus be a duopoly of one marketing cooperative and one private wholesaler, or a mixed duopoly including a public firm. The equilibrium outcomes of the two market arrangements are analysed and the welfare implications compared. It is shown that both consumers' surplus and total welfare are higher in a mixed duopoly with public firm than in a mixed duopoly with cooperative, which is in turn socially superior to a pure private duopoly. In the second part, agents' incentives with regard to choice of ownership structure are discussed and analysed in a two‐stage game.