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Price Discrimination and EU Dairy Policy: An Economic Evaluation of Policy Options

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  • Bouamra-Mechemache, Zohra
  • Chavas, Jean-Paul
  • Cox, Thomas L.
  • Requillart, Vincent

Abstract

In a period of market liberalization and multilateral trade negotiations, price discrimination for commodities with distinct markets provides additional policy options to support farm income. While both the USA and Canada have implemented price discrimination policies in their domestic dairy sector, so far the European Union (EU) has not. This paper evaluates the options of developing a price discrimination policy in the EU dairy sector. The analysis is based on an interregional model of the EU dairy sector, involving milk production, dairy processing, and consumption of ten dairy commodities in nine regions. The paper shows that a price discrimination policy that increases prices for commodities with more inelastic demand (fluid milk, soft dairy products) would generate income that can be redistributed to dairy farmers. The results suggest that, while such a price discrimination policy can be a WTO compatible way to support dairy farm income, the efficiency of the associated income transfers declines in the presence of significant supply response.

Suggested Citation

  • Bouamra-Mechemache, Zohra & Chavas, Jean-Paul & Cox, Thomas L. & Requillart, Vincent, 2002. "Price Discrimination and EU Dairy Policy: An Economic Evaluation of Policy Options," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24899, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae02:24899
    DOI: 10.22004/ag.econ.24899
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    1. Jean‐Paul Chavas & Thomas L. Cox & Edward Jesse, 1998. "Spatial allocation and the shadow pricing of product characteristics," Agricultural Economics, International Association of Agricultural Economists, vol. 18(1), pages 1-19, January.
    2. Snow, Arthur & Warren, Ronald Jr., 1996. "The marginal welfare cost of public funds: Theory and estimates," Journal of Public Economics, Elsevier, vol. 61(2), pages 289-305, August.
    3. Zohra Bouamra‐Mechemache & Jean‐Paul Chavas & Tom Cox & Vincent Réquillart, 2002. "EU Dairy Policy Reform and Future WTO Negotiations: a Spatial Equilibrium Analysis," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(2), pages 233-257, July.
    4. Thomas L. Cox & Jean-Paul Chavas, 2001. "An Interregional Analysis of Price Discrimination and Domestic Policy Reform in the U.S. Dairy Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 89-106.
    5. Zohra Bouamra-Mechemache & Jean-Paul Chavas & Thomas L. Cox & Vincent Réquillart, 2002. "Partial Market Liberalization and the Efficiency of Policy Reform: The Case of the European Dairy Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1003-1020.
    6. Catherine Benjamin & Alexandre Gohin & Hervé Guyomard, 1999. "The Future of European Union Dairy Policy," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 47(5), pages 91-101, December.
    7. Oskam, Arie, 1989. "Principles of the EC Dairy Model," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 16(4), pages 463-497.
    8. Burrell, Alison, 1985. "Price Uncertainty under EC Milk Quotas," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 12(4), pages 335-350.
    9. Catherine Benjamin & Alexandre Gohin & Hervé Guyomard, 1999. "The future of European Union dairy policy," Post-Print hal-01931505, HAL.
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    Cited by:

    1. Kuga, Nobunori & Vavra, Pavel & Anton, Jesus & Dewbre, Joe, 2003. "Trade And Welfare Effects Of Dairy Price Support Measures," 2003 Annual meeting, July 27-30, Montreal, Canada 21951, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Vargas Andrés José, 2001. "Strategic Interaction of International Markets: An Application to the Dairy Market," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, September.
    3. Vavra, Pavel & Kuga, Nobunori & Anton, Jesus & Dewbre, Joe, 2003. "Trade Effects of Dairy Pricing Arrangements," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25862, International Association of Agricultural Economists.
    4. Nobunori Kuga & Nobuhiro Suzuki & Harry M. Kaiser, 2010. "Trade implications of price discrimination in a domestic market," Agribusiness, John Wiley & Sons, Ltd., vol. 26(1), pages 64-82.

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