The paper shows that producer-owned firms are more efficient in quality provision than investor-owned firms if input quality is observable, while they are less efficient when the input quality is unobservable and the size of the organization is large.

We study the incentives for quality provision in a farmer-owned cooperative (co-op) and an investor-owned firm (iof). The quality of the final product is a function of the quality of the inputs, which are determined by the farmers? unobservable efforts. The input qualities are unobservable at...