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Rent Sharing Mechanisms In Production Alliances

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  • Cozzarin, Brian P.
  • Westgren, Randall E.
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    Abstract

    U.S. hog production has become an industrialized process. New technology has caused the scale of operations to increase, and the organizational form of hog farms to change. One of the new organizational forms can be found in North Carolina and Colorado where vertical integration and/or franchise-like production methods prevail. This type of production may not be possible or appealing to some producers. Instead, they may be able to reap some of the benefits of specialization by forming strategic alliances. The purpose of the paper is to answer the question: is it possible to create the same sort of control mechanisms in a production alliance that exist in a vertically integrated firm? Production risk is potentially one of the greatest problems in an alliance. We represent production risk with two measurements of performance – pig weight, and pig mortality. We find that high mortality has severe consequences for pig production. But, with appropriate rent allocation mechanisms, the member who causes under-production will be forced to bear most of the consequences.

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    Bibliographic Info

    Article provided by International Food and Agribusiness Management Association (IAMA) in its journal International Food and Agribusiness Management Review.

    Volume (Year): 03 (2000)
    Issue (Month): 03 ()
    Pages:

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    Handle: RePEc:ags:ifaamr:34479

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    Related research

    Keywords: Industrial Organization; Livestock Production/Industries;

    References

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    1. Lawrence, John D. & Kliebenstein, James, 1995. "Contracting and Vertical Coordination in the United States Pork Industry," Staff General Research Papers 5050, Iowa State University, Department of Economics.
    2. Koehler, Bob & Lazarus, William F. & Buhr, Brian L., 1996. "Swine Production Networks In Minnesota: Resources For Decision Making," Staff Papers 14232, University of Minnesota, Department of Applied Economics.
    3. Cozzarin, Brian P. & Barry, Peter J., 1998. "Organizational Structure In Agricultural Production Alliances," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 1(02).
    4. Peterson, H. Christopher & Wysocki, Allen F., 1998. "Strategic Choice Along The Vertical Coordination Continuum," Staff Papers 11651, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    5. Brian P. Cozzarin & Randall E. Westgren, 2000. "Rent Sharing in Multi-Site Hog Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 25-37.
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    Cited by:
    1. Uzea, F. Nicoleta & Fulton, Murray E., 2014. "Mechanisms for Effective Alliance Management: Insights from a Federated Cooperative Marketing System," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IAMA), vol. 17(1).

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