Each of the problems cited above presents an incentive for firms to extend their activities into another level of the system and to internalize al location decisions that might have been left to an open market. This internalizing may be accomplished by using contracts or by combining succeeding activities in the market channel into one firm. An operating cooperative represents form of integration of farm production and other stages in the system. Bargaining cooperatives generally use contracts to deal with market failures. The sections to follow provide more examples of specific situations in which cooperative action might benefit farmers.