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Abstract
This paper analyzes the challenges and opportunities for agricultural
marketing cooperatives in value-added, quality-differentiated markets.
Product quality in all of its dimensions is critical in modern food markets,
but various traditional cooperative business practices are not conducive to
success in meeting consumers’ demands for quality. We discuss and
evaluate these limitations, which have led to pessimism on the part of some
commentators regarding the future of cooperatives, but we also demonstrate
advantages, relative to investor-owned firms inherent in some traditional coop
practices, such as revenue pooling. We also propose and illustrate
appropriate modeling frameworks to study cooperatives’ performance in
differentiated-product market settings, including comparing the performance
of open- and closed-membership cooperatives in competition with an
investor-owned firm in a market with horizontal product differentiation.