A Game Theoretic Approach to Analyse Cooperation Between Rural Households in Northern Nigeria

CentER Discussion Paper No. 2008-62

24 Pages Posted: 9 Jul 2008

See all articles by Marloes Gerichhausen

Marloes Gerichhausen

Tilburg University - Department of Econometrics & Operations Research

Ezra Berkhout

Wageningen UR

Victor A. Manyong

International Instititute of Tropical Agriculture

Herbert Hamers

Tilburg University - Center for Economic Research (CentER); Tilburg University - Department of Econometrics & Operations Research

Date Written: July 9, 2008

Abstract

Much research focuses on development of new agricultural technologies to reduce poverty levels of the large population of smallholder farms in Sub Saharan Africa. In this paper we argue that smallholders can also increase their production in a different way, namely by using their resources more efficiently through cooperation. This is obtained by grouping their (heterogeneous) resources and making joint decisions based on the aggregate resources. Afterwards, the gains of the joint production are divided, such that each farmer remains independent.

This type of cooperation is modeled using linear programming and cooperative game theory. While linear programming establishes insight in optimal farm plans for farmers that cooperate, game theory is used to generate fair divisions of the extra gain that is established by cooperation.

The model is applied to a village in Northern Nigeria. Households are clustered based on socio-economic parameters, and we explore cooperation. The optimal farm plan of the cooperative (i.e., farmers cooperate) contains more crops with high market and nutritional value, such as cowpea and sugarcane. We show that the gross margin of the cooperative is 12% higher than the sum of the individual gross margins. To divide these gains, we consider four established solution concepts from game theory that divide these extra gains: the Owen value, Shapley value, compromise value and nucleolus. An interesting result is that all farmers gain from cooperation and that the four solution concepts give similar results. Finally, we show how the provision of micro-credit can be used to stimulate cooperation in practice, benefiting the least-endowed farmers as well.

Keywords: Linear Programming, Agriculture, Household models, Cooperative Game Theory, Nigeria

JEL Classification: C61, Q12, C71

Suggested Citation

Gerichhausen, Marloes and Berkhout, Ezra and Manyong, Victor M and Hamers, Herbert, A Game Theoretic Approach to Analyse Cooperation Between Rural Households in Northern Nigeria (July 9, 2008). CentER Discussion Paper No. 2008-62 , Available at SSRN: https://ssrn.com/abstract=1157286 or http://dx.doi.org/10.2139/ssrn.1157286

Marloes Gerichhausen (Contact Author)

Tilburg University - Department of Econometrics & Operations Research ( email )

Tilburg, 5000 LE
Netherlands

Ezra Berkhout

Wageningen UR ( email )

Hollandseweg 1
6700 HB Wageningen, 6706KN
Netherlands

Victor M Manyong

International Instititute of Tropical Agriculture ( email )

PMB 5320, Oyo Road, Ibadan
Oyo State, Dar es Salaam 200001
Tanzania
+255 23 2402370/1 (Phone)
+255 23 2402372/2775021 (Fax)

Herbert Hamers

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 4666 2660 (Phone)

Tilburg University - Department of Econometrics & Operations Research

Tilburg, 5000 LE
Netherlands

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