Process innovation activity in a mixed oligopoly: the role of cooperatives

This article develops a sequential game-theoretic model of heterogeneous producers to examine the market and welfare effects of cooperative involvement in process innovation activity in the agricultural sector. The analysis examines an open-membership, input-supplying cooperative (co-op) that maximi...

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Bibliographic Details
Published inAmerican journal of agricultural economics Vol. 87; no. 2; pp. 406 - 422
Main Authors Giannakas, K, Fulton, M
Format Journal Article
LanguageEnglish
Published 01.05.2005
Subjects
agricultural industry
agricultural products
commodity prices
cooperatives
econometric models
game theory
marketing
mathematical models
oligopoly
processing technology
profitability
research and development
social welfare
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Summary:This article develops a sequential game-theoretic model of heterogeneous producers to examine the market and welfare effects of cooperative involvement in process innovation activity in the agricultural sector. The analysis examines an open-membership, input-supplying cooperative (co-op) that maximizes member welfare and finances its innovation activity through retained earnings. Analytical results show that the presence of the co-op can increase the arrival rate of innovations while reducing the price of agricultural inputs. Cooperative involvement in innovation activity can thus be welfare enhancing and socially desirable with its effectiveness being determined by the degree of producer heterogeneity and the size of innovation costs.
ISSN:0002-9092
1467-8276
DOI:10.1111/j.1467-8276.2005.00731.x