Market organization is both the cause and effect of differences in functional efficiency. Despite this mutual dependency and responsiveness, structure research has stressed firm size, numbers, and concentration within an industry, while efficiency generally has been considered from a plant or firm viewpoint.

While the relationships would be similar for most agricultural product markets, this paper approaches the market organization-efficiency relationship with the specific question, “How does the organization and execution of supply coordination influence efficiency in a milk market?” Efficiency is compared by two measures: The proportion of supply needed as reserve, and the cost of handling the supply. The relevant variable is the organizational level at which responsibility is exercised for coordinating supply.