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Producer Organizations, Bargaining, and Asymmetric Information
[Organisations de producteurs, négociation et information asymétrique]

Author

Listed:
  • Jean-Marc Bourgeon

    (ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech, University of Maryland - Department of Agricultural and Resource Economics)

  • Robert Chambers

    (University of Maryland - Department of Agricultural and Resource Economics)

Abstract

As pointed out by Sexton, a cooperative's pricing rule can be affected by divergent interests of heterogeneous members. When such competing interests are present, production decisions may depart from the first-best optimum, and the marginal cost pricing rule cum fee/rebate may no longer be implementable. In a recent article, Vercammen, Fulton, and Hyde study such departures assuming a con- tinuum of producers' types and a nondiscri- minating management board. While their sim- ulation analysis indicates that the first-best is sometimes attainable in such instances, their theoretical analysis seems to suggest it is not. This article extends the analysis of the in- centive problems faced in producers' orga- nization by assuming that the different farmer types constitute different groups with differ- ent bargaining powers. Departures from an equal sharing of the oligopolistic gain appear as long as the bargaining power of a group does not correspond to its relative importance in the farm population. However, when bargaining disparities are small enough, the quantities produced will still correspond to first-best levels, and incentive-compatible sharing of the oligopolistic gain can be effected by a mixture of two-part pricing and nonlinear cost recovery. When the less (more) cost-efficient farmers have sufficiently high bargaining power, the redistributive objective conflicts with efficiency and the organization overproduces (underproduces) compared to the first-best level. Moreover, the nonlinear scheme may be implemented by offering two two-part schedules, one with a unit price equal to the marginal revenue that members of the less powerful group choose, and the other with a unit price greater or lower than this level depending on the productivity of the most influential group.

Suggested Citation

  • Jean-Marc Bourgeon & Robert Chambers, 1999. "Producer Organizations, Bargaining, and Asymmetric Information [Organisations de producteurs, négociation et information asymétrique]," Post-Print hal-02968359, HAL.
  • Handle: RePEc:hal:journl:hal-02968359
    DOI: 10.2307/1244021
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    Cited by:

    1. Prause Gunnar & Hoffmann Thomas, 2017. "Cooperative Business Structures for Green Transport Corridors," TalTech Journal of European Studies, Sciendo, vol. 7(2), pages 3-27, October.
    2. J.M. Bourgeon & B. Coestier, 2001. "Producer Organizations and Quality Management," THEMA Working Papers 2001-15, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    3. Julia HÖHLER & Rainer KÜHL, 2018. "Dimensions Of Member Heterogeneity In Cooperatives And Their Impact On Organization – A Literature Review," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 697-712, December.
    4. Angelo Zago, 2005. "Tecnhnology estimation for quality pricing in supply-chain relationships," Working Papers 27/2005, University of Verona, Department of Economics.
    5. Bontems, Philippe & Fulton, Murray, 2009. "Organizational structure, redistribution and the endogeneity of cost: Cooperatives, investor-owned firms and the cost of procurement," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 322-343, October.

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