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The Performance Of Agricultural Marketing Cooperatives In Differentiated Product Markets

  • Ronald W. COTTERILL

    ()

Recent empirical work suggests that cooperative presence in differentiated product markets lowers the consumer prices of all brands. This paper focuses on the theoretical basis for this competitive yardstick effect by cooperatives. It identifies two market structures where the competitive yardstick theorem for cooperatives can be extended from farmer-first handler markets to differentiated consumer product markets. They are (1) oligopoly with significant barriers to entry and (2) monopolistic competition with entry but only non-price competition. In the latter, the cooperative can also ensure that the socially optimal number of brands (product variety) is provided by the industry. The theory also provides useful guidance for determining when supply-limiting conduct in differentiated product markets should be challenged as undue price enhancement under the Capper-Volstead law.

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File URL: http://agecon.lib.umn.edu/ne165/ne165964.pdf
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Paper provided by University of Massachusetts in its series Department of Resource Economics Regional Research Project with number 964.

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Date of creation: 1997
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Handle: RePEc:wop:marerp:964
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Regional Research Project NE-165: Private Strategies, Public Policies, and Food System Performance, University of Massachusetts, Dept. of Resource Economics, Amherst, MA 01003

Web page: http://www.umass.edu/ne165/
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  1. Ronald W. Cotterill & Andrew W. Franklin & Li Yu Ma, 1996. "Measuring Market Power Effects in Differentiated Product Industries: An Application to the Soft Drink Industry," Food Marketing Policy Center Research Reports 032, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  2. E. V. Jesse & B. W. Marion & A. C. Manchester & Aaron. C. Johnson, 1982. "Interpreting and Enforcing Section 2 of the Capper-Volstead Act," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(3), pages 431-443.
  3. James Brander & Jonathan Eaton, 1982. "Product Line Rivalry," Working Papers 519, Queen's University, Department of Economics.
  4. Rogers, Richard T. & Marion, Bruce W., 1990. "Food Manufacturing Activities of the Largest Agricultural Cooperatives: Market Power and Strategic Behavior Implications," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 5.
  5. Cotterill, Ronald W. & Haller, Lawrence E., 1994. "Market Strategies in Branded Dairy Product Markets," Research Reports 25149, University of Connecticut, Food Marketing Policy Center.
  6. Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-65, June.
  7. Neven, Damien, 1985. "Two Stage (Perfect) Equilibrium in Hotelling's Model," Journal of Industrial Economics, Wiley Blackwell, vol. 33(3), pages 317-25, March.
  8. Royer, Jeffrey S. & Bhuyan, Sanjib, 1995. "Forward Integration by Farmer Cooperatives: Comparative Incentives and Impacts," Journal of Cooperatives, NCERA-210, vol. 10.
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