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Agents Monitoring Their Manager: A Hard‐Times Theory of Producer Cooperation

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  • Brent Hueth
  • Philippe Marcoul

Abstract

We model the producer cooperative as a firm where a single class of individuals supplies an essential input and monitors managerial behavior. We show how this contractual structure reduces the incidence of equilibrium credit rationing, even assuming a cost disadvantage relative to a firm where these roles are specialized. Our model provides an explanation for producer and worker buyouts in the face of exit by investor owners, and, more generally, for cooperative entry in low‐return economic environments not serviced by investor‐financed firms. Further, our model predicts that a cooperative firm is less prone to monitor‐manager collusion, and that it monitors excessively in high‐return environments.

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  • Brent Hueth & Philippe Marcoul, 2015. "Agents Monitoring Their Manager: A Hard‐Times Theory of Producer Cooperation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(1), pages 92-109, March.
  • Handle: RePEc:bla:jemstr:v:24:y:2015:i:1:p:92-109
    DOI: 10.1111/jems.12083
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    References listed on IDEAS

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    3. Elisabeta ROȘU & Monica Mihaela TUDOR, 2022. "Evolution And Structure Of Agricultural Cooperatives In Romania," Agricultural Economics and Rural Development, Institute of Agricultural Economics, vol. 19(1), pages 141-151.
    4. Murray E. Fulton & Konstantinos Giannakas, 2020. "Corruption in agricultural processing firms: A comparison of cooperatives and investor‐owned firms," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 68(4), pages 445-460, December.
    5. Hueth, Brent M. & Hutchins, Jared, 2018. "Production Credit Associations and Agricultural Productivity Change in the United States, 1920-1940," 2018 Annual Meeting, August 5-7, Washington, D.C. 274384, Agricultural and Applied Economics Association.

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