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Cooperative stability under stochastic quality and farmer heterogeneity

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  • Pierre Mérel
  • Tina L. Saitone
  • Richard J. Sexton

Abstract

Many cooperatives and related organisations use revenue pooling wherein products across multiple quality levels are commingled. Recent work showed that pooling ensures farmers against risks due to stochastic product quality and counteracts farmers' tendency to overproduce high-quality product. We extend their analysis to incorporate farmers who are heterogeneous in ability to produce high-quality products. We show that the revenue-pooling benefits of cooperation may be sufficient to cause high-quality producers to join a cooperative and pool revenues, at least partially, with lower-quality producers. We explore the producer and market characteristics conducive to the emergence of stable revenue-pooling cooperatives.

Suggested Citation

  • Pierre Mérel & Tina L. Saitone & Richard J. Sexton, 2015. "Cooperative stability under stochastic quality and farmer heterogeneity," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 42(5), pages 765-795.
    • Handle: RePEc:oup:erevae:v:42:y:2015:i:5:p:765-795.
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    File URL: http://hdl.handle.net/10.1093/erae/jbv020
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    Citations

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    Cited by:

    1. Jasper Grashuis, 2018. "An Exploratory Study of Cooperative Survival: Strategic Adaptation to External Developments," Sustainability, MDPI, vol. 10(3), pages 1-15, February.
    2. Ahmet Candemir & Sabine Duvaleix & Laure Latruffe, 2021. "Agricultural Cooperatives And Farm Sustainability – A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1118-1144, September.
    3. 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.
    4. Olivier Bonroy & Alexis Garapin & Hamilton Stephen & Diogo Souza-Monteiro, 2018. "Free-riding on product quality in cooperatives: lessons from an experiment," Post-Print hal-01815808, HAL.
    5. Jianyu Yu & Olivier Bonroy & Zohra Bouamra‐Mechemache, 2023. "Quality and quantity incentives under downstream contracts: A role for agricultural cooperatives?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(4), pages 1176-1196, August.
    6. Ma, Jun & Gao, Huixian & Cheng, Changgao & Fang, Zhou & Zhou, Qin & Zhou, Haiwei, 2023. "What influences the behavior of farmers' participation in agricultural nonpoint source pollution control?—Evidence from a farmer survey in Huai'an, China," Agricultural Water Management, Elsevier, vol. 281(C).

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