Agricultural cooperatives and the holdup problem: the case of the New Zealand dairy industry

This study aims to examine how pricing transparency affects organizational boundaries in agricultural markets. The authors use the introduction of the Global Dairy Trade auction (2008) and Farmgate Milk Price system (2010) as exogenous shocks that dramatically improved price discovery for dairy commodities in New Zealand. Using difference-in-differences methodology, the authors compare regions with both cooperative and investor-owned firm (IOF) processing facilities against cooperative-only regions from 2002 to 2015. The results reveal that cooperatives lost approximately 8% of market share following these pricing transparency improvements in regions where IOFs were active. This study contributes to organizational economics by showing how external market infrastructure changes can shift optimal firm boundaries, with implications for agricultural policy and cooperative governance.