University of Wisconsin Center for Cooperatives
Journal of Cooperatives

Title The Performance of Agricultural Marketing Cooperatives in Differentiated Product Markets
Author(s) Ronald W. Cotterill
Series Volume 12
Issue Date 1997
Abstract Recent empirical work suggests that cooperative presence in differentiated product markets lowers the consumer prices of all brands. This paper focuses on the theoretical basis for this competitive yardstick effect by cooperatives. It identifies two market structures where the competitive yardstick theorem for cooperatives can be extended from farmer-first handler markets to differentiated consumer product markets. They are (1) oligopoly with significant barriers to entry and (2) monopolistic competition with entry but only non-price competition. In the latter, the cooperative can also ensure that the socially optimal number of brands (product variety) is provided by the industry. The theory also provides useful guidance for determining when supply-limiting conduct in differentiated product markets should be challenged as undue price enhancement under the Capper-Volstead law.

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