Horizon and Free-Rider Problems in Cooperative Organizations

This paper develops a model of heterogeneous individuals to analyze the interacting horizon and free-rider problems faced by cooperative organizations. Analytical results identify the conditions under which a cooperative will form despite these property rights problems and show that (i) differences in members’ time horizons need not necessarily lead to short-term cooperative investments and (ii) free riding is not always a problem for cooperatives. The analysis also shows how a cooperative can use a membership fee to address these property rights problems and provides additional insights into the relationship between a cooperative’s cost structure and membership fees.


Subject(s):
Issue Date:
2016
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/246170
Published in:
Journal of Agricultural and Resource Economics, Volume 41, Number 3
Page range:
372-392
Total Pages:
21




 Record created 2017-04-01, last modified 2017-08-29

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