Measuring Benefits from a Marketing Cooperative in the Copper River Fishery

Abstract

The degradation of product quality is one form of rent dissipation resulting from incomplete property rights in fisheries. Industry structure and information asymmetries can also lead to underinvestment in product quality, even when property rights are well defined. In this article we empirically examine whether the voluntary formation of a marketing cooperative was able to mitigate market failures that led to the production of inferior‐quality fish. Specifically, we use a difference‐in‐differences estimation strategy to measure the impact that the Copper River Fishermen's Cooperative, an Alaskan salmon marketing cooperative, had on ex‐vessel salmon prices and salmon quality measures. We find that the cooperative was able to improve product quality, as well as attract and sustain a higher price for its salmon. Our findings provide empirical support for many of the key tenets of cooperative theory. Specifically, we find evidence that marketing cooperatives can address existing market failures, that marketing cooperatives can have advantages in high‐quality product markets, and that over time, as a result of their success, marketing cooperatives may lead to lasting producer benefits even though they become obsolete due to nonmember free‐riding.