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The economic theory of agricultural and consumer cooperatives

In: Handbook of Research on Cooperatives and Mutuals

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  • Jeffrey S. Royer

Abstract

The economic theory of agricultural marketing, farm supply, and consumer cooperatives is discussed from the perspective of the neoclassical paradigm. The standard theory of the firm is inadequate for understanding the behavior of cooperatives because cooperatives have objectives other than profit maximization and they return net earnings to members as patronage refunds or rebates. This chapter considers several objectives for cooperatives and their implications for pricing and output, economic efficiency, and market performance. Specific attention is given to the effects of cooperatives on the behavior of other firms in imperfect markets, including the competitive yardstick effect, and the implications of neoclassical theory on the comparative economic efficiency of cooperatives. The chapter concludes with suggestions for both theoretical and empirical research.

Suggested Citation

  • Jeffrey S. Royer, 2023. "The economic theory of agricultural and consumer cooperatives," Chapters, in: Matthew S. Elliott & Michael A. Boland (ed.), Handbook of Research on Cooperatives and Mutuals, chapter 1, pages 9-21, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:21014_1
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