Characteristics of Cooperative Activities: In Modern Economics' Perspective

Abstract

　Two approaches can be found within the existing theories regarding agricultural cooperatives. One is Demand-Supply Approach and the other is Game Theoretic Approach. The former successfully describes some institutional characteristics of cooperative, but it does not take account into the interaction of members or the characteristics of each member. On the contrary the latter does consider the interaction of members and characteristics of each member as well as the institutional characteristics. From this, Game Theoretic Approach can be said to be superior to Demand-Supply Approach. Nevertheless, this approach seems to be insufficient, especially regarding the assumption of members' behavior. In Game Theoretic Approach some assume the individual rationality of members, the other assume collective rationality. But neither of them cannot reflect real behaviors of the members.

　This paper assumes that members consider simultaneously both individual rationality and collective rationality. Needless to say, individual rationality is often inconsistent with collective rationality, Under such situation as Prisoner's Dilemma situation, the members inevitably struggle hard in order to equilibrate both rationalities. When members behave in this manner, the internal equilibrium of a cooperative can be different from usual one. In usual equilibrium, members aim at maximizing their own profit, and then fall into Prisoner's Dilemma situation. But the members with both rationalities can erase or dissolve the dilemma.

　From this analysis it can be said that one of the main characteristics of cooperative is the flexibility in dissolving Prisoner's Dilemma.