Farmer Cooperative or Investor-Owned Firm?
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| Title | Farmer Cooperative or Investor-Owned Firm?
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| Author | Huang Zuhui, Liang Qiao & George Hendrikse |
| Organization | China Academy for Rural Development, Zhejiang University; Rotterdam School of Management, Erasmus University |
| Email | zhhuang@zju.edu.cn,liangqiao2323@126.com,ghendrikse@rsm.nl |
| Key Words | Product Quality Differentiation; Industrial Organization; Farmer Cooperatives(FC); Investor-owned Firms(IOF) |
| Abstract | This paper examines how farmers producing differentiated (low, media, and high) quality products choose alternative industrial organization, i.e. FC (farmer cooperatives) or IOF (investor owned firm), in a non-cooperative game between farmers and industrial organizations. The results show: (1) An IOF and a FC coexist in equilibrium, which is the equilibrium result of revenue oriented farmers’ outlet and organizational form choices. (2) Farmers producing low quality products deliver to the FC while farmers producing higher quality products prefer to delivering to the IOF, which shows the original purpose of traditional cooperatives’ establishment, i.e. helping low power farmers enter the market. (2) Farmer cooperatives do have a “competition yardstick” effect on the market, since the presence of cooperatives in food outlet market not only shows the attractiveness of benefits for farmers, but also relieves market failure or IOFs monopoly by forcing IOFs choosing higher purchasing prices. (4) Government subsidy to cooperatives helps to enlarge the market share of cooperatives. |
| Serial Number | WP60 |
| Time | 2011-03-22 |
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