The Future of Agricultural Cooperatives

Abstract

Cooperatives are of particular interest to economists because of their unique ownership structure and the incentives this structure creates. In addition to the so-called property rights problems (e.g., free-rider, horizon, and portfolio problems), the analysis of agricultural cooperatives has focused on issues of market power, agency, product quality, and increasingly producer and consumer heterogeneity. These last three elements are important features of the industrialization of the agrifood system. This article highlights the key concepts required for examination of cooperatives now and in the future and incorporates these concepts into a framework that can be used to examine the myriad situations and problem settings in which agricultural cooperatives are likely to be found. A key finding of the paper is that the procompetitive and distributional impacts of cooperatives depend critically on the sensitivity of price in the downstream retail market, the nature of the cooperative’s governance structure, and the open or closed nature of cooperative membership. The article also provides a discussion of new areas in which an understanding of cooperatives and collective action would be valuable, as well as a discussion of the applicability of the proposed framework to these areas.