Player Games vs. Two Player

¶ … Player Games vs. Two Player Games: Comparing Agribusiness Cooperatives with Investor-Owned Business Models presents a unique and fresh perspective on the reasons why agribusiness enterprises choose to utilize the cooperative business model as opposed to an investor-owned business model. The author's fundamental question posited is what makes the cooperative form unique and desirable to agribusiness and rural enterprises in absence of any widely recognized, accepted, or sufficiently utilized empirical evidence or scholarly study defining the rationale. In answering this query the author relies on a distinction between cooperatives and investor-owned entities centering on two dynamics: the dichotomy between profit maximization and social welfare, and the recognition of cooperative users and owners as filling traditionally contrary roles as one economic agent.

In developing an econometric model to test and explicate the differences in business forms, the author identifies the dual roles of the cooperative agent (owner and consumer) integrated into a single economic actor. Contrastingly the investor model is segmented into two disparate actors playing separate roles. In defining the model in this manner the actors assume the familiar design concomitant with a classical Nash equilibrium, one and two player games. In analyzing the actions inside the one and two player games the results highlight a defining differential characteristic between cooperatives and investor-owned enterprises, the economic actors inside the models do not pursue the same objectives, and as such the cooperative model is not an inefficient profit maximizing firm but rather a social welfare maximizing entity.

Comments about the Model and Results

The adoption of the economic agents bifurcated into one and two player games for the purposes of identifying expected payoffs in a Nash equilibrium, is a strength of the model and of the submission. Given the four equilibriums that follow from the use of a cardinally valued matrix within supply and demand analysis, the model predicts using aggregated consumer and producer surpluses the resulting payoffs under the Nash equilibrium.

The model develops four cardinally valued matrix options, the first represented in Figure one which abstractly displays the aggregated payoffs in terms of their respective inequalities. Figure one provides some confusion for the reader in terms of its choice of profit maximization in the two player game however; the author significantly assists the reader in Figure two by assigning numeric values to the payoffs which provides a concreteness previously unavailable. Figures three and four further develop the payoffs under the one and two player models and develop several key conclusions. First that the one player game as defined by investor owned firms will choose profit maximization (an unexpected conclusion) however, its importance is in its opposed diametric in which two player games produce economic agents in a cooperative pursuing aggregate surpluses coinciding with social welfare. Second, the distinction in the resulting equilibriums is the defining difference between the cooperative and investor model.

The economic model is well thought out, but at times the discussion glosses over important distinctions which might provide greater perspicuity in the analysis. As an example a more detailed setup of the use of the cardinal variable and the neoclassical inequality assumptions might allow for the reader to better grasp the models conclusions in figures three and four. The author is at their best when they succinctly lay out the expected and actual results of the aggregate outputs under the Nash equilibrium, and their extrapolated meaning for the business models. Citing page 12 the author clearly states the differences of profit maximization in two player games, and the social welfare maximization found in one player games.

Assessment of the Exposition

The report has the traditional setup common to a paper submission: abstract, introduction, literature review, analysis, discussion, and conclusion. The abstract presents a summation of the methodology however, what could be added for greater emphasis is the author's definitive conclusion on why cooperatives are different than investor-owned firms and why they are chosen in agribusiness. The conclusion is of course interesting however, the why which is elucidated in the analysis will compel the reader to read on. The literature review is thorough and sets up a fundamental reason for the author's undertaking of the project; the available research is fragmented and not conclusive in its determination of why cooperatives and investor-owned models are different and why they are used. The author's strength in presentation is not in its subtlety but in its direct statement of fact, rationale, and logic. Citing pages five six, the discussion of profit maximization as the objective of firms is contrasted with evidence that this is not always the case, particularly for cooperatives. In creating this dichotomy the author purposefully or perhaps outlines their later argument that outcomes under the Nash Equilibrium are in fact consistent with the divergent objectives of one and two player actors in their respective business models.

The discussion section provides a solid continuation of the thorough and well-presented analysis section (discussed earlier in regards to the model). The author does a fine job of presenting the findings inside the analysis. Where the analysis section depends on a thorough understanding of economic, econometrics, and theory the discussion takes the conversation to a level which a cooperative user could find pragmatic and useful. In totality the exposition provides considerable insight and thoughtfulness in answering the questions outlined in the opening sections. The ending of the discussion though could use some counterpoint analysis in regards to its supposition on the continuing use of the cooperative model in agribusiness. The model is different because of the objectives of the economic players, and it has a demonstrated success record in achieving the goal of social welfare maximization. That said the analysis suggests that the cooperative model may thrive in agribusiness because it is a "boring model" devoid of competition however, is economics trumped by sociology in this case? The economic argument suggests that the actors understand the coordination of roles requisite for the one player game in maximizing social welfare however, could the use of the model be better explained by cultural or historic norms. This idea is not one to be presented in the paper but rather a point for the author to consider in the context of further research and alternative explanations.