The free rider problem in agricultural and livestock cooperatives in Rio Grande do Sul

Abstract

This study aimed to analyze the free rider problem in agricultural and livestock cooperatives in state of Rio Grande do Sul, Brazil and to examine the strategies employed by them to minimize this problem. The free rider problem arises when property rights are not negotiable, unsafe or not assigned, leading the cooperative members not to invest or participate in the cooperative, but to continue in the organization in order for them to benefit from the positive externalities generated by it. The mixed method was used in the execution of the research, by collecting qualitative and quantitative information. The sample comprised 10% of agricultural and livestock cooperatives linked to Ocergs, the organization of cooperatives of the state of Rio Grande do Sul. It was found that the cooperatives whose main business activity is “grains” face the free rider problem at a higher intensity. The mechanisms for exclusion of cooperative members and the technical assistance are important strategies to minimize this problem.