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Process Innovation Activity in a Mixed Oligopoly: The Role of Cooperatives
Author(s) -
Giannakas Konstantinos,
Fulton Murray
Publication year - 2005
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2005.00731.x
Subject(s) - oligopoly , earnings , welfare , microeconomics , industrial organization , process (computing) , economics , agriculture , innovation process , business , cournot competition , social welfare , market economy , ecology , economies of agglomeration , accounting , computer science , political science , law , biology , operating system
This article develops a sequential game‐theoretic model of heterogeneous producers to examine the market and welfare effects of cooperative involvement in process innovation activity in the agricultural sector. The analysis examines an open‐membership, input‐supplying cooperative (co‐op) that maximizes member welfare and finances its innovation activity through retained earnings. Analytical results show that the presence of the co‐op can increase the arrival rate of innovations while reducing the price of agricultural inputs. Cooperative involvement in innovation activity can thus be welfare enhancing and socially desirable with its effectiveness being determined by the degree of producer heterogeneity and the size of innovation costs.