Cooperative forward integration in oligopsonistic markets a simulation analysis of incentives and impacts

Abstract

A model of a two-stage vertical market structure consisting of producers, processors, and acooperative is developed to analyze the market incentives agricultural cooperatives may have forintegrating forward into processing activities and the comparative impacts of cooperative forwardintegration on producers and consumers when processors are alternately characterized by Cournot,competitive, and collusive behavior. Results suggest that cooperatives do not have an incentive tointegrate forward in competitive markets. In markets with some degree of market power, the potential forcooperative forward integration is linked to the cooperative's ability to restrict the output of its membersto optimal levels. © 2007 springer.