TITLE

The Value of a Norm: Open Membership and the Horizon Problem in Cooperatives

AUTHOR(S)
FULTON, MURRAY; GIANNAKAS, KONSTANTINOS
PUB. DATE
July 2012
SOURCE
Journal of Rural Cooperation;2012, Vol. 40 Issue 2, p145
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The horizon problem has long been identified as being important to the functioning and behavior of cooperatives. This paper shows that the investment disincentive that a cooperative (both at start-up and ongoing) has vis-à-vis an IOF is less severe than has been typically argued. There are two main findings. The first is that the standard intuitive understanding of the effect of different horizons typically starts from the implicit assumption that cooperative members have the same objective as their IOF counterparts. When this assumption is relaxed it is shown that even when the horizon problem is at its most severe (e.g., during the creation of a cooperative by the original members), the cooperative may - under certain conditions - be more likely to make an investment than a profit-maximizing IOF. The second key finding is that once the cooperative is operating, the horizon problem is mitigated by the open membership policy of cooperatives. However, the open membership policy, which specifically does not assign property rights to specific groups, is not one that is chosen as an equilibrium strategy by the members. Instead, it is a policy that is adopted on the basis of principle. To sustain this policy, the cooperative needs to maintain features such as a strong identity that serve to make deviation from the open membership principle difficult.
ACCESSION #
86388412

 

Related Articles

  • Are Cooperatives Efficient When Membership Is Voluntary? Leathers, Howard D. // Journal of Agricultural & Resource Economics;2006, Vol. 31 Issue 3, p667 

    If profit-maximizing farmers are free to join or not to join a cooperative, it may appear reasonable to assume that a cooperative will exist only when it has cost advantages over non-cooperative marketing. This paper presents a model in which that result fails. Every individual farmer chooses...

  • We are More Than a Magazine. Kubash, Tim; Cousineau, Ken // GreenMaster;Sep/Oct2012, Vol. 47 Issue 5, p8 

    The article offers the authors' insights on the "GreenMaster" magazine, which serves as the only communication tool between the Canadian Golf Superintendents Association (CGSA) and its members and other stakeholders. The authors say that they have reduced the size of the magazine and developed...

  • Superior profitability through innovation. Wilkinson, Jeffrey // Australian & New Zealand Grapegrower & Winemaker;Feb2013, Issue 589, p76 

    The article discusses the key role played by packaging and marketing innovations in improving profitability in the winery business. It describes the crucial role that the Wine Communicators of Australia (WCA), an independent association of wine professionals, can play in providing support to...

  • Ask the right questions. Baarda, James; Torgerson, Randall // Rural Cooperatives;May/Jun2002, Vol. 69 Issue 3, p20 

    Focuses on the involvement of members in the formation of cooperatives. Management of the business by members; Interest in cooperative decisions; Analysis on the form of cooperative organization.

  • CWT members support program changes.  // Rural Cooperatives;Jul/Aug2013, Vol. 80 Issue 4, p43 

    The article reports on the endorsement of the members of Cooperatives Working Together (CWT) of a larger investment in the farmer-funded, self-help program with a vote that raises the membership requirement from two cents to four cents per hundredweight effective July 1, 2013.

  • Treasurer's Report. Parker, Marilyn B. // NACTA Journal;Sep2013, Vol. 57 Issue 3, p85 

    The article focuses on the profit and loss statement created by QuickBooks for the North American College and Teachers Agriculture(NACTA).

  • Introducing the Commonwealth Braille and Talking Book Cooperative. Kearney, Greg // Braille Monitor;Apr2012, Vol. 55 Issue 4, p332 

    The article focuses on the Commonwealth Braille and Talking Book Cooperative (CBTBC) in the U.S. It outlines the mission of the organization, which is designed to promote collaboration and sharing of the resources among Baille and Talking Book libraries. It notes the members of the organization,...

  • PCCA announces further cash distribution of $17.4 million to its members.  // High Plains Journal;10/19/2015, Vol. 133 Issue 42, p6B 

    The article reports on the additional cash distribution of 17.4 million dollars announced by Plains Cotton Cooperative Association (PCCA) for its members.

  • A Two-Way Street. Wadsworth, James // Rural Cooperatives;Jul/Aug2014, Vol. 81 Issue 4, p4 

    The article emphasizes on the need of members of a cooperative to know and fulfil their responsibilities and periodically review them so that a co-op could deliver quality goods and services to its members. Members should understand the purpose of the cooperative, know its legal foundations,...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics