University of Wisconsin Center for Cooperatives
Journal of Cooperatives
ARTICLES


Title Forward Integration by Farmer Cooperatives: Comparative Incentives and Impacts
Author(s) Jeffrey S. Royer and Saryib Bhuyan
Series Volume 10
Issue Date 1995
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.

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