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The Bargaining Strength of a Milk Marketing Cooperative

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  • Prasertsri, Peerapon
  • Kilmer, Richard L.

Abstract

As a result of economies of size, food processors are generally large and few in number. These characteristics put processors at a bargaining advantage over independent farmers. Marketing cooperatives were established to counter the uneven bargaining position of individual farmers. This article investigates the relative bargaining strength of one milk marketing cooperative and several fluid milk processors. The Nash bargaining model can be used to analyze the negotiated price in the Florida fluid milk market which acts like a bilateral monopoly. The milk marketing cooperatives have bargained well with the milk marketing processors. The monthly bargaining strength of the Southeast Dairy Cooperative, Inc. (SDC), exceeds the monthly bargaining strength of the processors in all twelve months, ranging from a low of 0.6664 in January to a high of 0.7831 in September. The monthly average bargaining strength across all months for SDC is 0.7326.

Suggested Citation

  • Prasertsri, Peerapon & Kilmer, Richard L., 2008. "The Bargaining Strength of a Milk Marketing Cooperative," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 37(2), pages 1-7.
    • Handle: RePEc:ags:arerjl:45664
    DOI: 10.22004/ag.econ.45664
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Sexton, Richard J., 1993. "Noncooperative Game Theory: A Review with Potential Applications to Agricultural Markets," Research Reports 25183, University of Connecticut, Food Marketing Policy Center.
    3. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    4. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, November.
    5. Richard J. Sexton, 1993. "Noncooperative Game Theory: A Review with Potential Applications to Agricultural Markets," Food Marketing Policy Center Research Reports 022, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
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    Cited by:

    1. Maximilian Koppenberg, 2023. "Markups, organic agriculture and downstream concentration at the example of European dairy farmers," Agricultural Economics, International Association of Agricultural Economists, vol. 54(2), pages 161-178, March.
    2. Xiaowei Cai & Kyle W. Stiegert, 2013. "Economic analysis of the US fluid milk industry," Applied Economics Letters, Taylor & Francis Journals, vol. 20(10), pages 971-977, July.
    3. Hayashida, K., 2018. "Bargaining Power between Food Processors and Retailers: Evidence from Japanese Milk Transactions," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277730, International Association of Agricultural Economists.

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