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Cooperatives and Quality-Differentiated Markets: Strengths, Weaknesses, and Modeling Approaches

Author

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  • Merel, Pierre R.
  • Saitone, Tina L.
  • Sexton, Richard J.

Abstract

This paper analyzes the challenges and opportunities for agricultural marketing cooperatives in value-added, quality-differentiated markets. Product quality in all of its dimensions is critical in modern food markets, but various traditional cooperative business practices are not conducive to success in meeting consumers’ demands for quality. We discuss and evaluate these limitations, which have led to pessimism on the part of some commentators regarding the future of cooperatives, but we also demonstrate advantages, relative to investor-owned firms inherent in some traditional coop practices, such as revenue pooling. We also propose and illustrate appropriate modeling frameworks to study cooperatives’ performance in differentiated-product market settings, including comparing the performance of open- and closed-membership cooperatives in competition with an investor-owned firm in a market with horizontal product differentiation.

Suggested Citation

  • Merel, Pierre R. & Saitone, Tina L. & Sexton, Richard J., 2009. "Cooperatives and Quality-Differentiated Markets: Strengths, Weaknesses, and Modeling Approaches," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 37(2), pages 1-24.
    • Handle: RePEc:ags:jlorco:163816
    DOI: 10.22004/ag.econ.163816
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    References listed on IDEAS

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    Cited by:

    1. Jasper Grashuis, 2018. "Joint ownership by farmers and investors in the agri-food industry: an exploratory study of the limited cooperative association," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 6(1), pages 1-14, December.
    2. Tina L. Saitone & Richard J. Sexton, 2017. "Agri-food supply chain: evolution and performance with conflicting consumer and societal demands," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 44(4), pages 634-657.
    3. López-Bayón, Susana & González-Díaz, Manuel & Solís-Rodríguez, Vanesa & Fernández-Barcala, Marta, 2018. "Governance decisions in the supply chain and quality performance: The synergistic effect of geographical indications and ownership structure," International Journal of Production Economics, Elsevier, vol. 197(C), pages 1-12.
    4. Xiao Peng & George Hendrikse & Wendong Deng, 2018. "Communication and Innovation in Cooperatives," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(4), pages 1184-1209, December.
    5. George Hendrikse & Li Feng, 2013. "Interfirm cooperatives," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 26, Edward Elgar Publishing.
    6. Teresa Hooks & Áine Macken-Walsh & Olive McCarthy & Carol Power, 2017. "The Impact of a Values-Based Supply Chain (VBSC) on Farm-Level Viability, Sustainability and Resilience: Case Study Evidence," Sustainability, MDPI, vol. 9(2), pages 1-19, February.
    7. Deng, Wendong & Hendrikse, George, 2014. "Social capital and incentives in the provision of product quality by cooperatives," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182687, European Association of Agricultural Economists.

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