COOPERATIVE FORMATION AND FINANCIAL CONTRACTING IN AGRICULTURAL MARKETS

Brent Hueth, Philippe Marcoul and Roger G. Ginder

No 18478, Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem

Abstract: Cooperative formation in agriculture sometimes occurs in response to the exit of a private firm and typically requires substantial equity investment by participating farmers. What economic rationale can explain why farmers are willing to contribute capital to an activity that (apparently) fails to attract non-farm or "private" investment? We hypothesize that farm capital is high cost, relative to that provided by private entrepreneurs (or in other words, that there is a degree of asset fixity in farm capital) but that it engenders greater organizational commitment-which is particularly important when expected market returns are low-on the part of producers. This commitment arises from the indirect incentive properties associated with at-risk capital. We identify market environments where these incentives are necessary for firm survival and interpret the efficient financial contract in this context as a "cooperative."

Keywords: Agribusiness (search for similar items in EconPapers)
Pages: 18
Date: 2003
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/18478/files/wp030349.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:hebarc:18478

DOI: 10.22004/ag.econ.18478

Access Statistics for this paper

More papers in Hebrew University of Jerusalem Archive from Hebrew University of Jerusalem
Bibliographic data for series maintained by AgEcon Search ().