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Horizon and Free-Rider Problems in Cooperative Organizations

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  • Giannakas, Konstantinos
  • Fulton, Murray
  • Sesmero, Juan

Abstract

This paper develops a model of heterogeneous individuals to analyze the interacting horizon and free-rider problems faced by cooperative organizations. Analytical results identify the conditions under which a cooperative will form despite these property rights problems and show that (i) differences in members’ time horizons need not necessarily lead to short-term cooperative investments and (ii) free riding is not always a problem for cooperatives. The analysis also shows how a cooperative can use a membership fee to address these property rights problems and provides additional insights into the relationship between a cooperative’s cost structure and membership fees.

Suggested Citation

  • Giannakas, Konstantinos & Fulton, Murray & Sesmero, Juan, 2016. "Horizon and Free-Rider Problems in Cooperative Organizations," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(3), pages 1-21.
  • Handle: RePEc:ags:jlaare:246170
    DOI: 10.22004/ag.econ.246170
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    References listed on IDEAS

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    2. Aristotelis Batzios & Achilleas Kontogeorgos & Fotios Chatzitheodoridis & Panagiota Sergaki, 2021. "What Makes Producers Participate in Marketing Cooperatives? The Northern Greece Case," Sustainability, MDPI, Open Access Journal, vol. 13(4), pages 1-15, February.

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