Alternative Co-operative Structures for the Agri-food Sector: An Exploratory Study

In a context of internationalisation and concentration, bio-foods co-operatives often face problems of capital access and governance. According to Spear (2001), limited access to capital, management structure, governance conflicts, and the local, regional or national focus of co-operatives limit their expansion. Recent events in Canada, such as Agricore going public and Dairyworld being absorbed by a corporation, have reinforced this perception (Thibault and Dupuis, 2003). In this evolving competitive environment, the traditional co-operative model cannot thrive and succeed if static. New hybrid co-operative models are emerging, and an analysis of these models should contribute to an understanding of the trade-off between co-operative values and other attributes necessary for survival in an increasingly competitive environment.Agribusiness, Marketing,

Keep It Down: An Experimental Test of the Truncated k-Double Auction

The introduction of a centralized institution for trading production rights in quota-regulated agricultural sectors can dramatically improve the flow of information among market participants and increase efficiency. On the other hand, prevailing conditions in these small markets can provide sellers with a market advantage, yielding high quota prices that impose important financial costs on quota holders and limit the entry of new producers into the industry. In this paper, we modify the normal allocation rule of the k-double auction (kDA) to counter thin market conditions and to favor buyers who bid low prices. In laboratory experiments, we test the “truncated†kDA (T-kDA) against a regular kDA for its ability to affect buyer and seller behavior and decrease equilibrium prices, and assess how it impacts efficiency. The results show that the T-kDA significantly lowers the equilibrium price and results in moderate efficiency losses. Most importantly, the T-kDA effectively counters the market power of oligopolists when demand far outstrips supply.k-double auction, experimental economics, truncated, efficiency, commodity market, Agribusiness, Industrial Organization, Institutional and Behavioral Economics,

The Relationship between Farmers' Values and the Decision to Practise Agrotourism: An Exploratory Study

Agrotourism is a growing economic activity in North America that is increasingly being seen as a new alternative for farmers seeking to augment or diversify their incomes (Lyson, 2003; Bourdeau, Doyon and Donne, 2001). Although the literature recognizes the economic dimension of agrotourism for farmers, many authors imply or argue that choosing agrotourism activities instead of alternatives such as horizontal integration or a new production activity goes well beyond rational economic optimization (Morette, Gramond and Portefait, 1998; Moinet, 1993; Grolleau and Ramus, 1986). This article explores this hypothesis by adapting the experiential approach developed by Holbrook and Hirschman (1982) to an analysis of consumer behaviour by decision makers.Production Economics,

Keep it Down: An Experimental Test of the Truncated Uniform Price Auction

The introduction of a centralized institution for trading production rights in quota-regulated agricultural sectors can dramatically improve the flow of information among market pareticipants and increase efficiency. On the other hand, prevailing conditions in these small markets can provide sellers with a market advantage, yielding high quota prices that impose important financial costs on quota holders and limit the entry of new producers into the industry. In this paper, we modify the normal allocation rule of a uniform price auction (UPA) to favor buyers who bid low prices. In laboratory experiments, we test this “Truncated” Uniform Price Auction (T-UPA) against a regular Uniform Price Auction for its ability to decrease equilibrium prices, affect buyer and seller behavior and to assess how it impacts efficiency. The results show that the T-UPA significantly lowers the equilibrium price and results in moderate efficiency losses. Most importantly, the T-UPA effectively counters the market power of oligopolists when demand far outstrips supply. La mise en place d’une enchère centralisée pour l'échange des droits de production dans les secteurs agricoles peut considérablement améliorer le flux d'information parmi les participants au marché, ainsi qu'accroître l'efficacité. Toutefois, les conditions qui règnent dans ces petits marchés peuvent fournir aux vendeurs un avantage de marché, ce qui produit des prix de quotas élevés et limite l'entrée de nouveaux producteurs dans l'industrie. Dans cet article, nous modifions la règle de répartition normale d'une enchère de prix uniforme (UPA) afin de favoriser les acheteurs qui offrent des prix plus faibles. Dans les expériences de laboratoire, nous testons une enchère de prix uniforme «tronquée» (T-UPA) contre une enchère de prix uniforme régulière afin de tester sa capacité de diminuer les prix d'équilibre, d'influencer le comportement de l'acheteur et du vendeur, et d'évaluer son impact sur l'efficacité économique. Les résultats montrent que la T-UPA réduit considérablement le prix d'équilibre et entraîne des pertes d'efficacité modérées. Plus important encore, la T-UPA réussit à contrer le pouvoir de marché des oligopoleurs lorsque la demande dépasse largement l'offre.Auction, uniform, experimental economics, truncated, efficiency, commodity market , Enchère, uniforme, économie expérimentale, tronquée, efficacité, marché de commodité

Imputing Dairy Producers' Quota Discount Rate Using the Individual Export Milk Program in Quebec

Trade liberalization scenarios are often evaluated using sophisticated programming models that rely on a number of assumptions related to demand and supply parameters. One challenge researchers often encounter in the calibration of dairy trade liberalization models is to identify the supply response of producers under production quotas. The existence of production quotas in the Canadian dairy industry implies departures from standard marginal cost pricing. Under traditional net present value models, an assumption about the discount factors attached to production quotas must be made to infer the supply response of Canadian dairy producers following a change in the economic environment (e.g., import tariffs). The Individual Export Milk (IEM) program in Quebec generated an opportunity to estimate dairy producers’ discount factors for production quotas conditional on different assumptions about structural parameters such as producers’ risk preferences and cost efficiency.International Relations/Trade, Productivity Analysis,

POTENTIAL IMPLICATIONS OF FREER TRADE FOR THE UNITED STATES AND CANADIAN DAIRY SECTORS: A SPATIAL ANALYSIS

International Relations/Trade,

An Application of Experimental Economics to Agricultural Policies: the Case of U.S. Dairy Deregulation on Farm-Level Markets

R.B. 97-11Current dairy regulations in the U.S. are the result of over 80 years of regulatory activities. Through the 1920s and 1930s the U.S. government passed various acts designed to increase the share of market surplus captured by sellers, which at the time was judged insufficient. Lately, budget constraints and commitments to freer trade agreement have let the government and some dairy sector leaders contemplate different levels of dairy deregulation. The elimination of the Federal Milk Marketing Orders (FMMOs), a cornerstone of U.S. dairy regulation, has emerged as a possibility. The thought of eliminating the FMMOs was particularly disturbing to milk producers because of uncertainty regarding what might happen to the farm price, the volume of raw milk supplied, market stability and price efficiency, and to the distribution of market surplus between dairy farmers and dairy processing plants. These particular questions have not been extensively studied before due to data availability problems. Data from the era prior to the establishment of FMMOs would be difficult to obtain, and probably not meaningful because FMMOs have been around since the late-1930s. Experimental economics is used to simulate U.S. dairy market conditions and the effect of the elimination of FMMOs. The experimental task is a simple 2 X 2 matrix laboratory game. The treatments are oligopsony and regulation. Perishability is represented by an advance production decision with no carry-over and is kept constant across the experiments. Experimental sessions comprised 12 periods and a practice period. Sellers made production decisions and received a pool price, while buyers made a price (bid) and quantity decision. The allocation of units produced is made by the monitor on a highest bid basis. The game is computer assisted. Experimental results indicate that, in the absence of regulation, buyers are successful in reducing market price below the perfectly competitive price and in capturing a larger share of market surplus than a competitive solution predicts. Regulation reduced the market power of buyers and the price fluctuation of raw milk, in an oligopsonistic market, and had no significant impact on the overall price efficiency of the market

Media Advertising and Ballot Initiatives: An Experimental Analysis

Spending on political advertising increases with every election cycle, not only for congressional or presidential candidates, but also for state-level ballot initiatives. There is little research in marketing, however, on the effectiveness of political advertising at this level. In this study, we conduct an experimental analysis of advertisements used during the 2008 campaign to mandate new animal welfare standards in California (Proposition 2). Using subjects' willingness to pay for cage-free eggs as a proxy for their likely voting behavior, we investigate whether advertising provides real information to likely voters, and thus sharpens their existing attitudes toward the issue, or whether advertising can indeed change preferences. We find that advertising in support of Proposition 2 was more effective in raising subjects' willingness to pay for cage-free eggs than ads in opposition were in reducing it, but we also find that ads in support of the measure reduce the dispersion of preferences and thus polarize attitudes toward the initiative. More generally, political ads are found to contain considerably more "hype" than "real information" in the sense of Johnson and Myatt (2006).Animal Welfare, Proposition 2, Cage Free eggs, Willingness to Pay, BDM auction, Political Advertising, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, Marketing, Political Economy, Production Economics, Public Economics,

Hypothetical bias for private goods: does cheap talk make a difference?

Economists and market researchers often need to accurately gauge consumers’ willingness-to-pay for private goods. The experimental literature has identified a problem of hypothetical bias when using stated preferences techniques, such as open-ended questions. It has been suggested that using a cheap talk script has the potential to resolve this bias. Yet, few empirical studies on the efficiency of cheap talk for private goods exist. This study uses a between-subjects experimental design to compare consumers’ willingness-to-pay for DHA-enriched milk using three elicitation methods: 1) Hypothetical open-ended stated preference question, without monetary consequence for the respondent; 2) Idem to the first with the addition of a cheap talk script; and 3) A Vickrey auction with real monetary consequences. In this experiment subjects have the choice to participate, or not, at each period. Our results indicate a significant hypothetical bias. While the use of cheap talk has no impact on this bias, it does however increase the level of participation to the market

Hypothetical bias for private goods: does cheap talk make a difference?

Economists and market researchers often need to accurately gauge consumers’ willingness-to-pay for private goods. The experimental literature has identified a problem of hypothetical bias when using stated preferences techniques, such as open-ended questions. It has been suggested that using a cheap talk script has the potential to resolve this bias. Yet, few empirical studies on the efficiency of cheap talk for private goods exist. This study uses a between-subjects experimental design to compare consumers’ willingness-to-pay for DHA-enriched milk using three elicitation methods: 1) Hypothetical open-ended stated preference question, without monetary consequence for the respondent; 2) Idem to the first with the addition of a cheap talk script; and 3) A Vickrey auction with real monetary consequences. In this experiment subjects have the choice to participate, or not, at each period. Our results indicate a significant hypothetical bias. While the use of cheap talk has no impact on this bias, it does however increase the level of participation to the market