THE EFFECT OF MARKETING COOPERATIVES ON COST-REDUCING PROCESS INNOVATION ACTIVITY



13


2ctψ+4tψ2+8ct2ψ2-t -2ctψpC+8t2ψ2pI+(8t2ψ2-2tψ-1)wC(1)

I(1)                                1612ψ2 - 4tψ -1

Regarding the co-op, its problem at this stage is to determine the price that maximizes the welfare
of its pre-innovation membership in both the pre- and post-innovation stages of the game, subject to
raising earnings that can be retained to finance its cost-reducing innovation in stage 2. The capital

x2

x C(1)

---an and the problem of the co-op
2
ψ


12
required for the subsequent investment in innovation is IC = — ψtC

at the pre-innovation stage can be expressed as:

(37)


max MW = MW11^ + MW (3/1) = ( wC (1)  c ) χC (1)  txCc (1) + ( pC  c + c ) xC (1)    x(' (1)

WC (1)                                                      2                     ψ                2

s.t.


ΠC(1)


IC0 =>( pC


-wC(1)


- c ) XC (1) - '   0

2ψ


where MW(1) is the welfare of the pre-innovation membership in stage 1. The optimality conditions for


the co-op’s optimization problem suggest that the co-op will find it optimal to choose its price such that
the investment constraint binds, i.e., the co-op will price its input so that it raises exactly the amount of
capital needed for its innovation activity in stage 2. The best response function of the co-op is then:

4tψpC+wI(1) -t(4cψ+1)

WC (1) =           4 tψ +1


The Nash equilibrium prices and quantities at the pre-innovation stage of the mixed oligopsony


are given by:


(38)


'    t-4t2ψ+(4tψ-3)pC+4tψpI

w (1) =             8tψ - 3


-c


(39)


'     8t2ψ2+4tψ-3+8tψ2(pI-pC)

x1 (1) =        ( 4 tψ +1)(8 tψ - 3)


4t-12t2ψ+(32t2ψ2-8tψ-3) pC+4tψpI

(40)   wCfn =--------------------—--------------------

C(1)               (4tψ+1)(8tψ-3)


(41)


`     8tψ[3>tψ -1 + ψ(PC - Pi )]

XC(1) =     (4tψ +1)(8tψ - 3)




More intriguing information

1. The name is absent
2. Are Japanese bureaucrats politically stronger than farmers?: The political economy of Japan's rice set-aside program
3. Fiscal Policy Rules in Practice
4. The name is absent
5. Density Estimation and Combination under Model Ambiguity
6. The Trade Effects of MERCOSUR and The Andean Community on U.S. Cotton Exports to CBI countries
7. The name is absent
8. Emissions Trading, Electricity Industry Restructuring and Investment in Pollution Abatement
9. Group cooperation, inclusion and disaffected pupils: some responses to informal learning in the music classroom
10. The name is absent