Cooperative Enterprise as a Structural Dimension of Farm Markets

This article reports on a theoretical analysis of cooperative marketing under alternative sets of assumptions regarding market structure. For some major results, consider a market where raw material is sold by a perfectly competitive industry to a processing industry. If the processing industry has an atomistic structure and no barriers to entry, cooperative marketing—where some processors are cooperatively organized by raw material producers—may cause departures from perfectly competitive equilibrium in the short run, but not in the long run. Where there is but one processor and blockaded entry, cooperative organization of that firm leads to smaller departures from competitive equilibrium than that associated with pure monopsony under many circumstances. Restricted membership cooperation, however, can give rise to market results that are undesirable from the viewpoint of all except the member producers. If the finished product is sold in perfect competition and scale diseconomies do not exist, cooperative marketing tends to lead to competitive equilibrium regardless of other structural conditions that would support monopsony elements.