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Rent Sharing Mechanisms In Production Alliances

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  • Cozzarin, Brian P.
  • Westgren, Randall E.

Abstract

U.S. hog production has become an industrialized process. New technology has caused the scale of operations to increase, and the organizational form of hog farms to change. One of the new organizational forms can be found in North Carolina and Colorado where vertical integration and/or franchise-like production methods prevail. This type of production may not be possible or appealing to some producers. Instead, they may be able to reap some of the benefits of specialization by forming strategic alliances. The purpose of the paper is to answer the question: is it possible to create the same sort of control mechanisms in a production alliance that exist in a vertically integrated firm? Production risk is potentially one of the greatest problems in an alliance. We represent production risk with two measurements of performance – pig weight, and pig mortality. We find that high mortality has severe consequences for pig production. But, with appropriate rent allocation mechanisms, the member who causes under-production will be forced to bear most of the consequences.

Suggested Citation

  • Cozzarin, Brian P. & Westgren, Randall E., 2000. "Rent Sharing Mechanisms In Production Alliances," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 3(03).
  • Handle: RePEc:ags:ifaamr:34479
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    File URL: http://purl.umn.edu/34479
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    References listed on IDEAS

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    1. Lawrence, John D. & Kliebenstein, James, 1995. "Contracting and Vertical Coordination in the United States Pork Industry," Staff General Research Papers Archive 5050, Iowa State University, Department of Economics.
    2. Brian P. Cozzarin & Randall E. Westgren, 2000. "Rent Sharing in Multi-Site Hog Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(1), pages 25-37.
    3. Peterson, H. Christopher & Wysocki, Allen F. & Harsh, Stephen B., 2001. "Strategic Choice Along The Vertical Coordination Continuum," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 4(02).
    4. John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
    5. Kliebenstein, James & Lawrence, John D., 1995. "Contracting and Vertical Coordination in the United States Pork Industry," ISU General Staff Papers 199501010800001264, Iowa State University, Department of Economics.
    6. Cozzarin, Brian P. & Barry, Peter J., 1998. "Organizational Structure In Agricultural Production Alliances," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 1(02).
    7. Kliebenstein, James B. & Lawrence, John D., 1995. "Contracting and Vertical Coordination in the United States Pork Industry," ISU General Staff Papers 199507010700001264, Iowa State University, Department of Economics.
    8. Koehler, Bob & Lazarus, William F. & Buhr, Brian L., 1996. "Swine Production Networks In Minnesota: Resources For Decision Making," Staff Papers 14232, University of Minnesota, Department of Applied Economics.
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    Cited by:

    1. Uzea, F. Nicoleta & Fulton, Murray E., 2014. "Mechanisms for Effective Alliance Management: Insights from a Federated Cooperative Marketing System," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 17(1).

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