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The Effect Of Cooperatives On Product Innovation In The Agri-Food System

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  • Drivas, Kyriakos
  • Giannakas, Konstantinos

Abstract

This paper develops a game-theoretic model of heterogeneous consumers to analyze the effect of cooperative involvement on quality-enhancing product innovation activity, the pricing of food products, and the welfare of the groups involved in the context of a mixed duopoly where an openmembership consumer co-op competes with an IOF. Analytical results show that the involvement of the member welfare-maximizing co-op in R&D can be quality and welfare enhancing by increasing the arrival rate of product innovations and reducing the prices of food products. The effectiveness of the coop is shown to depend on the nature of product differentiation and the relative quality of its products, the degree of consumer heterogeneity, and the size of innovation costs.

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File URL: http://purl.umn.edu/21223
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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number 21223.

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Date of creation: 2006
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Handle: RePEc:ags:aaea06:21223

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Keywords: cooperatives; product innovation; mixed oligopoly; retained earnings; Agribusiness;

References

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  1. Segerstrom, Paul S & Anant, T C A & Dinopoulos, Elias, 1990. "A Schumpeterian Model of the Product Life Cycle," American Economic Review, American Economic Association, vol. 80(5), pages 1077-91, December.
  2. Aghion, P. & Howitt, P., 1989. "A Model Of Growth Through Creative Destruction," UWO Department of Economics Working Papers 8904, University of Western Ontario, Department of Economics.
  3. Kostas Karantininis & Angelo Zago, 2001. "Endogenous Membership in Mixed Duopsonies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1266-1272.
  4. Murray Fulton & Konstantinos Giannakas, 2001. "Organizational Commitment in a Mixed Oligopoly: Agricultural Cooperatives and Investor-Owned Firms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1258-1265.
  5. Svend Albæk & Christian Schultz, 1998. "On the relative advantage of cooperatives," CIE Discussion Papers 1998-02, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
  6. Aoki, Reiko, 1991. "R&D Competition for Product Innovation: An Endless Race," American Economic Review, American Economic Association, vol. 81(2), pages 252-56, May.
  7. Berit Tennbakk, 1995. "Marketing Cooperatives In Mixed Duopolies," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(1), pages 33-45.
  8. Konstantinos Giannakas & Murray Fulton, 2005. "Process Innovation Activity in a Mixed Oligopoly: The Role of Cooperatives," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 406-422.
  9. Fudenberg, Drew & Gilbert, Richard & Stiglitz, Joseph & Tirole, Jean, 1983. "Preemption, leapfrogging and competition in patent races," European Economic Review, Elsevier, vol. 22(1), pages 3-31, June.
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Cited by:
  1. Pascucci, Stefano & Royer, Annie & Bijman, Jos, 2011. "Should I Make or Should I Buy? Innovation Strategies and Governance Structures in the Italian Food Sector," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 2(2).
  2. Stephen C. Smith & Jonathon Rothbaum, 2013. "Cooperative in a Global Economy: Key Economic Issues, Recent Trends, and Potential for Development," Working Papers 2013-6, The George Washington University, Institute for International Economic Policy.

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