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Nonlinear Pricing Schemes for Agricultural Cooperatives

Author

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  • James Vercammen
  • Murray Fulton
  • Charles Hyde

Abstract

Standard pricing practices are generally not efficient for a cooperative. Sexton (1986) suggests that membership fees/rebates can be used to facilitate efficient pricing, but such schemes may not be feasible because of membership heterogeneity and information asymmetries. In this paper a constrained efficient pricing rule for a cooperative is derived that explicitly addresses the heterogeneity and information constraints. The optimal rule generally entails nonlinear pricing which, for the case of a farm purchasing cooperative, entails a higher average price for higher delivery volumes. The constrained efficient rule is modified to distribute the benefits more evenly over the cooperative's membership. Copyright 1996, Oxford University Press.

Suggested Citation

  • James Vercammen & Murray Fulton & Charles Hyde, 1996. "Nonlinear Pricing Schemes for Agricultural Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 572-584.
    • Handle: RePEc:oup:ajagec:v:78:y:1996:i:3:p:572-584
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    File URL: http://hdl.handle.net/10.2307/1243275
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    Citations

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    Cited by:

    1. Olimov, Jafar, 2014. "Cooperatives and the Risk Aversion of Farmers," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170833, Agricultural and Applied Economics Association.
    2. David Martimort & Jérôme Pouyet & Carine Staropoli, 2020. "Use and abuse of regulated prices in electricity markets: “How to regulate regulated prices?”," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 605-634, July.
    3. Viergutz, Tim & Schulze-Ehlers, Birgit, 2018. "Member Commitment and Switching Decisions in Dairy Cooperatives – A Factorial Survey," 2018 International European Forum (163rd EAAE Seminar), February 5-9, 2018, Innsbruck-Igls, Austria 276864, International European Forum on System Dynamics and Innovation in Food Networks.
    4. Ibrahima Barry & Damien Rousselière, 2022. "Do quality incentive payments improve cooperative performance? The case of small French agricultural cooperatives," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(3), pages 938-948, September.
    5. Fulton, Murray E. & Gibbings, Julie, 2000. "Response And Adaption: Canadian Agricultural Co-Operatives In The 21st Century," Miscellaneous Publications 31768, University of Saskatchewan, Centre for the Study of Co-operatives.
    6. Mussell, Al, 2003. "PRICE DISCOVERY MECHANISMS AND ALTERNATIVES FOR CANADIAN AGRICULTURE; Part II: A Review of Pricing Mechanisms from the Economic Literature," Miscellaneous Publications 18100, George Morris Center.
    7. Julia HÖHLER & Rainer KÜHL, 2018. "Dimensions Of Member Heterogeneity In Cooperatives And Their Impact On Organization – A Literature Review," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 697-712, December.
    8. Angelo Zago, 2005. "Tecnhnology estimation for quality pricing in supply-chain relationships," Working Papers 27/2005, University of Verona, Department of Economics.
    9. Bontems, Philippe & Fulton, Murray, 2009. "Organizational structure, redistribution and the endogeneity of cost: Cooperatives, investor-owned firms and the cost of procurement," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 322-343, October.
    10. H. Holly WANG & Jong Won PARK & Timothy BAKER, 2011. "Contracting, negotiation, and the policy change: The conflict between Korean farmers and their agricultural coo," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 57(10), pages 467-473.
    11. Størdal, Ståle, 2004. "Efficient timber pricing and purchasing behavior in forest owners' associations," Journal of Forest Economics, Elsevier, vol. 10(3), pages 135-147, November.
    12. Martin, Larry J. & Mayer, Holly & Bouma, Jerry, 2002. "Benefits And Costs Of A Voluntary Wheat Board For The Province Of Alberta," Miscellaneous Publications 18090, George Morris Center.
    13. Kalogeras, Nikos & van der Lans, Ivo A.C.M. & Pennings, Joost M.E. & van Dijk, Gert, 2004. "Members' Preferences For Cooperative Structures: An Experimental Conjoint Study," 2004 Annual meeting, August 1-4, Denver, CO 20292, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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