Cooperation and Cheating

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.


Subject(s):
Issue Date:
2006
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/21158
Total Pages:
30
Series Statement:
Organized Symposium Paper




 Record created 2017-04-01, last modified 2017-08-24

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