Imperfect markets for used machinery, asynchronous replacement times, and heterogeneity in cost as path-dependent barriers to cooperation between farmers

Based on microeconomic theory and farm management analyses, we investigate situations in which individually rational actors abstain from potentially profitable cooperation with respect to the common use of assets like farm machinery. Path-dependent differences in the individual willingness of farmers to pay for the use of new machinery are determined by imperfect markets for used machinery that deteriorate sales prospects, but also by asynchronous replacement times for existing machines, and by heterogeneity in farm structures and sizes. These findings suggest a new explanation for the long-term persistence of the relatively high density of machinery in regions with many small-scale farms.

Research highlights
► Introduces new explanation for reluctance in machine cooperation.
► Identifies heterogeneity in willingness to pay as key factor.
► Uses a model of demand and supply for machine utilisation as explanation.
► Develops a model of implicit price discrimination as a possible solution.