Some of these questions include what are the origins of the current property right structure in US producer-owned business firms in agriculture? What are the efficiency implications of this structure? How could the inefficiencies characterizing this property right structure be ameliorated? What might be the characteristics of an efficiently designed producer-owned alternative ownership structure? Which ownership structure is successful in aligning residual rights of control and residual claims? This research provides answers to these questions by developing a neoinstitutional theoretical framework for analyzing and comparing alternative firm ownership structures. In designing an efficiency-maximizing institutional arrangement for a producer owned and controlled business firm, several important questions must be addressed. From a neoinstitutional point of view, this study is concerned with the design of a producer-driven, collective action, business organization-an ex ante contract which assigns residual rights of control and residual claimant rights in an organizational efficiency-maximizing way. Even more specifically, this research applies the Coasian 'nexus of contracts' definition of efficiency to user-owned agricultural cooperatives in US. Specifically, this dissertation inspects the strength of the residual claims-residual control rights-criterion in examining user-owned firms. This study explores the applicability of the residual claims-residual control rights argument to alternative business forms. Until now, scholarly work has concentrated on investor-oriented forms of business organization. This is because in the process of maximizing its own individual returns, that party will also generally be led to maximize organizational efficiency. Leading organizational scholars ( e.g., Milgrom and Roberts 1992, Hart 1995, and Hart and Moore 1998) suggest that, in the case of a firm, it is advantageous to have as many decision rights as possible vested with the party receiving the residual returns. Using agricultural cooperatives as an example set of user-owned and controlled institutional arrangements, the economic issue examined is the degree of residual rights of control and residual claims alignment. Our results suggest that theoretical bargaining models require some separation between the determinants of bargaining power and fair compensation for risk exposure.This research addresses the issue of efficient user-owned and controlled organizational design. When given the chance to choose a less or more risky distribution over which to bargain, residual claimants tend to choose the more risky distribution only when there is the possibility of an equal-split ex-post. Moreover, bargaining frictions increase as risk increases, and we document more frequent disagreements as risk increases. Contrary to theory, the comparatively less risk adverse residual claimants benefit the most. In some cases the premium is so high that it is advantageous to bargain over a risky pie rather than a risk-less pie.

Contrary to the intuition that risk exposure is detrimental, we show that residual claimants are able to extract a risk premium, which is increasing in risk exposure. We experimentally investigate a bargaining environment in which players negotiate over a fixed payment to one player, while the other player receives the residual from a random pie realization after subtracting the fixed payment.

Residual claimant