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The Formation of Cooperatives: A Game-Theoretic Approach with Implications for Cooperative Finance, Decision Making, and Stability

Richard J. Sexton
American Journal of Agricultural Economics
Vol. 68, No. 2 (May, 1986), pp. 214-225
Stable URL: http://www.jstor.org/stable/1241423
Page Count: 12
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The Formation of Cooperatives: A Game-Theoretic Approach with Implications for Cooperative Finance, Decision Making, and Stability
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Abstract

This paper departs from the traditional organization-oriented approach to cooperative analysis. It exploits cooperation's functional similarity to vertical integration to examine individuals' incentives to form cooperatives. A model of formation of a purchasing cooperative is presented and developed as an n-person game with the core as a solution concept. Core existence is examined for both single- and multiple-cooperative configurations, and cooperative finance methods are examined relative to finding core-compatible allocation rules. The results provide insight into a cooperative's equilibrium output, stability, decision making, financing methods, and choice of open or restricted membership.

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