The Effects of Different Political Schemes on the Willingness to Invest, Firm Profitability and Economic Efficiency in the Dairy Sector - An Agent-Based Real Options Approach-
AbstractIn recent years, the dairy sector has been exposed to strong changes in general conditions and extreme fluctuations in milk prices. Farmers and lobbyists have therefore asked politicians for additional market regulation. In this paper an agent-based real options market model is developed, which allows the analysis of the effects of different political schemes on the willingness to invest, firm profitability and economic efficiency in the dairy sector. The model results show that political schemes generally increase the willingness to invest in competitive markets under consideration of real options effects. However, they do not offer any substantial financial benefits to the producers and can cause a significant reduction in welfare. Furthermore, the results suggest that investment subsidies are preferable to lower price limits because the welfare is less reduced under the same stimulation of the willingness to invest.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 122nd Seminar, February 17-18, 2011, Ancona, Italy with number 100039.
Date of creation: 10 Feb 2011
Date of revision:
Real Options; Competition; Policy Impact Analysis; Dairy Sector; Agricultural and Food Policy; D81; Q12; Q18;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-03-05 (Agricultural Economics)
- NEP-ALL-2011-03-05 (All new papers)
- NEP-REG-2011-03-05 (Regulation)
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