We consider members who can either join an open membership-processing cooperative, or sell their homogeneous raw commodity to an investor-owned firm. The cooperative and the IOF compete à la Cournot in the raw commodity market, being the duopsonists to the agricultural producers, and with perfect competition in the processed (world) market. For members of the cooperative, we assume decentralized decision-making behavior, i.e., Nash-Cournot behavior, (1) following a recent contribution (Albæk and Schultz). Using this approach, we consider first an open membership policy with homogeneous members and then we address the issue of heterogeneous membership. We introduce producers that are heterogeneous in terms of efficiency, and the question we address is whether more efficient producers would prefer to join a cooperative or to sell their commodity to an alternative venue, i.e., to the investor-owned firm. We believe this is an important line of research, once one recognizes that members look at different outside opportunities and market outlets when not satisfied with their returns from the cooperative. Our research investigates the effects of endogeneous membership and heterogeneity on members' and cooperatives' behavior.
