A Theoretical Assessment of Informal Agricultural Cooperation Under Distrust: Implications from a Network Perspective

Abstract A common form of cooperation in rural areas corresponds to informal alliances in which farmers save productive costs, for example, by sharing inputs, machinery, and information. By reducing costs cooperatively, these alliances contribute to agricultural land management by increasing efficiency. Despite the benefits, these alliances are typically formed by a small number of farmers. Some researchers attribute this lack of participation to distrust. To model this type of cooperation, this article extends the traditional Network of Collaboration approach which has traditionally been developed in an oligopolistic context. While oligopoly is a type of market structure that can exists in agriculture, most of the farmers who participate in informal cooperation are small enterprises suggesting that the price-taking assumption is a more realistic description for these farmers. We use this market structure extension to show that profit-maximising farmers consider the positive impact of cost reduction; the negative impact of distrust; and the expected gain in output when joining new informal alliances. As such, recommendations are provided to integrate these three factors to facilitate the formation of beneficial informal network alliances in the rural landscape and their positive externality in agricultural land management.