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Abstract

This paper studies different patterns of emergence of cooperatives. We examine how heterogeneity of farmers, reflected in a distance measure, affects equilibrium outcomes. Our results show that when distance costs are low, cooperative emerges bottom-up. With medium distance costs, one of the farmers takes an initiative. With high distance costs, no cooperative emerges. Including an outsider in the game changes equilibrium strategies of players. Under complete information, cooperative is either formed with an initiative of one farmer or it emerges top-down with outsider’s support. When information is incomplete, cooperative can emerge bottom-up, i.e. with two active farmers, or top-down.

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