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Reversing the road to super farms

  • Furtan, William Hartley
  • Karantininis, Kostas
  • Lund, Mogens

The organization of primary agriculture is dependent upon whether the institutions of a country allow for reverse franchising by farmers. If the transaction costs of managing a farm can be minimized by farmers conducting a form of collective action, such as cooperatives, then the size of farms will be smaller. If farms have to make the products in the firm, which are subject to very large economies of scale than super farms will be the result. The key is the existence of institutions, such as collective action and property rights, that allow for the minimization of costs. For this reason the organization of primary agriculture is, among other things, a public policy issue. In this paper we develop this argument, we sketch a theoretical framework based on a model of adaptive relational contracts, and we present two illustrative examples: the Danish cooperative system, and the Canadian Wheat Board.

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File URL: http://purl.umn.edu/10025
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Paper provided by European Association of Agricultural Economists in its series 102nd Seminar, May 17-18, 2007, Moscow, Russia with number 10025.

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Date of creation: 2007
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Handle: RePEc:ags:eaa102:10025
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  1. Teece, David J., 1980. "Economies of scope and the scope of the enterprise," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 223-247, September.
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  4. Richardson, G B, 1972. "The Organisation of Industry," Economic Journal, Royal Economic Society, vol. 82(327), pages 883-96, September.
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  6. Claude Ménard, 2004. "The Economics of Hybrid Organizations," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(3), pages 345-, September.
  7. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
  8. Allen, Douglas W & Lueck, Dean, 1998. "The Nature of the Farm," Journal of Law and Economics, University of Chicago Press, vol. 41(2), pages 343-86, October.
  9. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185.
  10. Howard Cox & Simon Mowatt & Martha Prevezer, 2003. "New Product Development and Product Supply within a Network Setting: The Chilled Ready-meal Industry in the UK," Industry and Innovation, Taylor & Francis Journals, vol. 10(2), pages 197-217.
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