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Lookup NU author(s): Dr Diogo Monjardino De Souza Monteiro
This is the authors' accepted manuscript of an article that has been published in its final definitive form by Oxford University Press, 2019.
For re-use rights please refer to the publisher's terms and conditions.
An important issue facing marketing cooperatives is that the overall quality of theproduct depends on the quality of farm products provided by individual members. Weconduct an experiment to empirically investigate producer incentives to free-ride onquality among members of a marketing cooperative in a setting where the averagequality provided by members of the cooperative results in a collective rent that is distributedback to members in a patronage dividend levied in proportion to the quantityproduced. Hidden actions by cooperative members that impact quality are imperfectlymonitored, but free-riding, when detected, results in exclusion from cooperative returns.The randomized payoff structure of our game results in a novel experimentaldesign that nests public good games and multi-player assurance games. Our findingsindicate that free-riding on product quality is deterred when: (i) cooperatives base patronagedividends on quality outcomes of smaller groups; (ii) payoffs from free-ridingare randomized by the possibility of exclusion from cooperative returns; and (iii) cooperativesdistribute a larger share of returns to members through indirect paymentssuch as capital pooling and cost sharing arrangements unrelated to product quality.
Author(s): Olivier O, Garapin A, Hamilton SF, Souza Monteiro DM
Publication type: Article
Publication status: Published
Journal: American Journal of Agricultural Economics
Year: 2019
Volume: 101
Issue: 1
Pages: 89-108
Print publication date: 01/01/2019
Online publication date: 29/05/2018
Acceptance date: 29/03/2018
Date deposited: 10/10/2016
ISSN (print): 0002-9092
ISSN (electronic): 1467-8276
Publisher: Oxford University Press
URL: https://doi.org/10.1093/ajae/aay025
DOI: 10.1093/ajae/aay025
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