NONLINEAR PRICING SCHEMES FOR AGRICULTURAL COOPERATIVES

Standard pricing practices are generally not efficient for a cooperati ve. Sexton (1986) suggests that membership fees/rebates can be used to facilitate efficient pricing, but such schemes may not be feasible be cause of membership heterogeneity and information asymmetries. In this paper a constrained efficient pricing rule for a cooperative is deriv ed that explicitly addresses the heterogeneity and information constra ints. The optimal rule generally entails nonlinear pricing which. for the case of a farm purchasing cooperative, entails a higher average pr ice for higher delivery volumes. The constrained efficient rule is mod ified to distribute the benefits more evenly over the cooperative's me mbership.