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Abstract
A model of a three-stage vertical market structure consisting of agricultural
producers. an assembler, and a processor is developed to analyze the market
incentives farmer cooperatives may have for integrating forward into processing
activities and to evaluate the comparative impacts of cooperative forward integration
on producers and consumers. Although forward integration by cooperatives
generally provides benefits to both producers and consumers under fixed-proportions
processing technology and constant assembly and processing costs. the
existence of an integration incentive appears to depend upon the ability of the
cooperative to restrict the raw product output of its producers to optimal levels.