Bargaining among farmers, goodwill, and the success of cooperatives

Ram Ranjan

    Research output: Contribution to journalArticle

    1 Citation (Scopus)

    Abstract

    A model of concessional bargaining among farmers explains the success (or lack thereof) of cooperative institutions in rural farm settings in the developing regions. Concessional bargaining in day-to-day interactions generates goodwill, which helps smoothen future dealings amongst farmers as well as with outside agents. In particular, we model the existence of goodwill amongst farmers as enhancing their ability to collectively bargain with an outside dealer that buys their farm produce. Results suggest that when dealing with each other, farmers offer higher concessions when the risk of loss or reversal in bargaining power is high; however, the level of concession is also influenced by the degree of reciprocity and parameters that affect bargaining surplus. Findings provide further insights over the success of cooperative institutions in rural farm settings where inter-farmer goodwill dynamics determines the cooperative's bargaining outcomes. Specifically, when farmers generously reciprocate each other's goodwill gestures, it leads to better outcomes through increasing their cooperative reservation price. In contrast, when the degree of reciprocity is lower, or when the risk of bargaining power switching is higher, farmers extract more surplus from other farmers, and this also lowers the cooperative's bargaining outcomes and makes the cooperative arrangement unviable in the long term.

    Original languageEnglish
    Pages (from-to)589-610
    Number of pages22
    JournalAnnals of Public and Cooperative Economics
    Volume88
    Issue number4
    Early online date4 May 2017
    DOIs
    Publication statusPublished - Dec 2017

    Keywords

    • farm cooperatives
    • farm collectives
    • collective farm bargaining
    • goodwill
    • reciprocity
    • bargaining amongst farmers
    • farm produce marketing

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