Cooperation and Cheating

Robin M. Cross, Steven T. Buccola and Enrique A. Thomann

No 21158, 2006 Annual meeting, July 23-26, Long Beach, CA from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: In this article, we extend the variable delivery claim framework (Cross, Buccola, and Thomann, 2006) to examine the option-to-cheat, that is, the option to shift production between contracts ex post. We use this framework to provide a solution to the age-old conflict between enforcement and the cooperative tradition of providing a "home" for member produce. We show that, in contrast to Nourse's competitive yardstick hypothesis, the value of the cooperative-provided option increases as market competition intensifies. When the option-to-cheat is fairly-priced, it is Pareto improving, increasing grower returns, lowering cooperative per-unit costs and reducing contract shortfalls for investor-owned rivals at no additional per-unit cost. Our valuation framework is consistent with replication-based equilibria and is free from parametric specification of individual preference or firm cost structure.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 30
Date: 2006
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea06:21158

DOI: 10.22004/ag.econ.21158

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