Article Abstract
In agricultural markets, farmers often face powerful investor-owned firms (IOFs) that dominate marketing and impose pricing pressure at the farm-gate. To counter this, farmers can form cooperatives (co-ops), which differ from IOFs in their objectives and transaction dynamics, to collectively enter the market. Although co-ops can be established with different membership structures, the impact of their potential market entry remains unclear, as does the question of which co-op type is more likely to succeed and perform better. Methodology/results: We propose a two-stage game-theoretical model to examine farmers’ strategic responses to a dominant IOF through the formation of a co-op, with either open membership, which does not restrict membership size, or closed membership, which regulates the size. Our results show that farmers will initiate co-op formation when the farm-gate price drops below a certain threshold. The mere threat that farmers may form a co-op can pressure the IOF to raise farm-gate prices, even when the co-op does not succeed in entering the market. We also find that the farmers’ response of establishing a co-op benefits both farmers and consumers by raising farm-gate prices, while simultaneously reducing consumer prices. However, these effects diminish when the market size is sufficiently small, where the co-op no longer poses a credible threat to the IOF. We compare the benefits of closed versus open co-ops and find that, although closed co-ops are better at gaining market access, open co-ops may be more profitable for farmers. Managerial implications: By quantifying the conditions under which it occurs, the findings illustrate and extend the “competitive yardstick” effect, where co-op entry pushes the IOF to offer better services for farmers. The result that co-op formation can simultaneously improve both farmer and consumer welfare is important for policy makers as they consider economic and regulatory frameworks for co-ops.
Manufacturing & Service Operations Management, March 2026
About the researcher
Dr Xiaoyan (Miya) Qian is a Senior Lecturer in Operations and Supply Chain Management at the University of Melbourne. Before joining the University of Melbourne, she was an Associate Professor of Operations Management at Dongbei University of Finance and Economics, China.
Dr. Qian completed her Ph.D. in Operations and Supply Chain Management at the University of Auckland Business School in 2017, New Zealand. In 2023, she also held a visiting position at Melbourne Business School.
Her research expertise includes modeling contracts and incentives in agricultural supply chains and exploring the interface of operations and finance. Currently, her work mainly focuses on decision-making processes related to agricultural co-operatives. Dr. Qian has published in leading journals such as Manufacturing & Service Operations Management, Production and Operations Management, European Journal of Operations Research, and International Journal of Production Research. She has also received two competitive research grants from the National Natural Science Foundation of China.