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Cooperative pricing and scale efficiency: The case of Korean rice processing complexes
Author(s) -
Yoo ChunKwon,
Buccola Steven,
Gopinath Munisamy
Publication year - 2013
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12013
Subject(s) - scale (ratio) , ask price , business , industrial organization , returns to scale , economies of scale , contrast (vision) , microeconomics , variety (cybernetics) , economics , marketing , computer science , production (economics) , finance , physics , quantum mechanics , artificial intelligence
Unlike most investor‐owned enterprises, cooperatives often have freedom to choose among a variety of firm objectives. Using 2002–2008 plant‐ and province‐level data, we ask in the present article which of several alternative maximands a Korean cooperative rice processing firm pursues. In contrast to earlier studies, farmer‐member supply functions are incorporated into the cooperative's optimization framework. We show that only large cooperative firms have operated at efficient scale, while small and medium‐sized ones have been scale‐inefficient. Because the latter operate where scale returns are increasing, mergers of small and medium‐sized cooperatives likely would be cost‐reducing and member‐return‐enhancing.