Producers' Price Expectations and the Size of the Welfare Gains from Price Stabilisation
AbstractThis paper uses a simulation model to measure the size of the social welfare gains from price stabilisation within the general setting of a non-linear, multiplicative risk and lagged expectations model of the market. The size of the gains is found to be relatively small when producers plan on the basis of rational expectations, but it can be quite substantial for other types of expectations behaviour, including those commonly assumed in empirical supply analysis. We conclude that, in many cases, improved market information services may more economically provide the substantial part of the social benefits of price stabilisation.
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Bibliographic InfoArticle provided by Australian Agricultural and Resource Economics Society in its journal Review of Marketing and Agricultural Economics.
Volume (Year): 51 (1983)
Issue (Month): 02 (August)
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Willig, Robert D, 1976. "Consumer's Surplus without Apology," American Economic Review, American Economic Association, vol. 66(4), pages 589-97, September.
- Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
- Massell, Benton F, 1969. "Price Stabilization and Welfare," The Quarterly Journal of Economics, MIT Press, vol. 83(2), pages 284-98, May.
- Feder, Gershon, 1977. "The impact of uncertainty in a class of objective functions," Journal of Economic Theory, Elsevier, vol. 16(2), pages 504-512, December.
- Fisher, Brian S., 1983. "Rational Expectations In The Australian Wool Industry," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 27(03), December.
- Alston, Julian M. & Freebairn, John W., 1988. "Producer Price Equalization," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(03), December.
- Fisher, Brian S., 1985. "Frontiers in Agricultural Policy Research," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 53(02), August.
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