Do Cooperatives Offer High Quality Products?

Dieter Pennerstorfer and Christoph Weiss ()

No 9403, 103rd Seminar, April 23-25, 2007, Barcelona, Spain from European Association of Agricultural Economists

Abstract: The present paper investigates the free-riding problem in determining product quality within cooperatives in a vertically related market. Whereas the individual member has to bear all costs associated with higher quality, the benefits of delivering higher quality have to be shared among all members. On the basis of a Mixed-Oligopoly model, we show that the free-rider problem in the supply of high-quality products, although important for the members of the cooperative, may not be strong enough to ensure that firms will always supply higher quality than cooperatives. Whether the cooperative can overcome the free-riding problem and supply a final product of high quality is shown to depend on the consumer's valuation of quality, the costs of producing high quality, the way in which the quality of the final product is determined from the quality levels of the inputs delivered as well as on the number of members of the cooperative.

Keywords: Agribusiness (search for similar items in EconPapers)
Pages: 19
Date: 2007
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:eaa103:9403

DOI: 10.22004/ag.econ.9403

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